Multiple Choice
Which of the following best describes how net sales are calculated on the income statement?
60
views
4. Merchandising Operations
Net Sales
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following terms refers to the total revenue from sales after deducting sales returns, allowances, and discounts?
A
Operating Income
B
Gross Profit
C
Accounts Receivable
D
Net Sales
Verified step by step guidance1
Understand the term 'Net Sales': Net Sales refers to the total revenue generated from sales after deducting any sales returns, allowances, and discounts. It represents the actual revenue a company earns from its sales activities.
Identify the components to calculate Net Sales: These include Total Sales Revenue, Sales Returns, Sales Allowances, and Sales Discounts.
Set up the formula for Net Sales: Net Sales = Total Sales Revenue - Sales Returns - Sales Allowances - Sales Discounts.
Differentiate Net Sales from other terms: Operating Income refers to profit after deducting operating expenses, Gross Profit is the difference between Net Sales and Cost of Goods Sold, and Accounts Receivable represents money owed by customers.
Apply the concept: To determine Net Sales, always subtract the deductions (returns, allowances, and discounts) from the total sales revenue to arrive at the actual revenue earned.
9:04mWatch next
Master Net Sales:Sales Discounts (Gross Method) with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
