Which of the following best describes 'Net Sales' in financial accounting?

• A. The gross profit earned before deducting operating expenses.
• B. The physical item or service a company sells.
• C. The total cost incurred to produce goods sold during a period.
• D. The total revenue from goods or services sold, minus sales returns, allowances, and discounts.

Answer: (D)

Verified step by step guidance

1. Understand the term 'Net Sales' in financial accounting. It represents the total revenue generated from goods or services sold, adjusted for any sales returns, allowances, and discounts.
2. Break down the components of Net Sales: Total Revenue, Sales Returns, Allowances, and Discounts. Total Revenue is the gross income from sales before any deductions.
3. Sales Returns refer to the value of goods returned by customers due to defects or other reasons. These reduce the total revenue.
4. Allowances are reductions in the selling price offered to customers, often due to minor defects or other issues. These also decrease the total revenue.
5. Discounts are reductions in the price offered to customers, such as early payment discounts or promotional discounts. Subtract these from the total revenue to calculate Net Sales.