Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

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

Net income plus interest expense

Total assets minus total liabilities

Total sales revenue minus sales returns, allowances, and discounts

Total sales revenue before any deductions

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Verified step by step guidance

Understand the concept of 'Net Sales': In financial accounting, 'Net Sales' refers to the total sales revenue generated by a company after deducting sales returns, allowances, and discounts. It represents the actual revenue earned from sales transactions.

Break down the components: Total sales revenue is the gross amount earned from selling goods or services. Sales returns are the value of goods returned by customers. Allowances are reductions in price due to defects or other issues. Discounts are reductions in price offered to customers for early payment or promotional purposes.

Apply the formula for Net Sales: The formula is Net Sales = Total Sales Revenue - Sales Returns - Allowances - Discounts. This formula ensures that only the revenue actually retained by the company is accounted for.

Compare the options provided: Evaluate each option against the definition and formula for Net Sales. For example, 'Net income plus interest expense' and 'Total assets minus total liabilities' do not align with the concept of Net Sales. 'Total sales revenue before any deductions' is incorrect because it does not account for returns, allowances, and discounts.

Select the correct answer: Based on the explanation and formula, the correct description of Net Sales is 'Total sales revenue minus sales returns, allowances, and discounts.'