Which of the following statements accurately describes net sales?

• A. Net sales include only cash sales and exclude credit sales.
• B. Net sales are calculated by adding sales returns and allowances to total sales.
• C. Net sales are the same as gross sales before any deductions.
• D. Net sales are calculated as total sales minus sales returns, allowances, and discounts.

Answer: (D)

Verified step by step guidance

1. Understand the concept of net sales: Net sales represent the revenue generated from sales after accounting for deductions such as sales returns, allowances, and discounts.
2. Identify the components of total sales: Total sales include all sales transactions, both cash and credit sales, before any deductions.
3. Recognize the deductions: Sales returns refer to goods returned by customers, allowances are price reductions given to customers for defective or damaged goods, and discounts are reductions in price offered to customers for early payment or promotional purposes.
4. Calculate net sales: Use the formula: $\mathrm{Net}\mathrm{Sales}=\mathrm{Total}\mathrm{Sales}-\mathrm{Sales}\mathrm{Returns}-\mathrm{Allowances}-\mathrm{Discounts}$.
5. Apply the formula to determine net sales: Subtract the total value of sales returns, allowances, and discounts from the total sales to arrive at the net sales figure.