Multiple Choice
The profit from a product is also called the:
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4. Merchandising Operations
Net Sales
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Which of the following best defines 'Net Sales' in financial accounting?
A
Total sales revenue before any deductions
B
Total sales revenue minus sales returns, allowances, and discounts
C
Output per hour in the business sector
D
Total cost of goods sold during a period
Verified step by step guidance1
Understand the concept of 'Net Sales': In financial accounting, 'Net Sales' refers to the total revenue generated from sales after deducting sales returns, allowances, and discounts. It represents the actual revenue earned from sales transactions.
Step 1: Begin with the total sales revenue, which is the gross amount earned from selling goods or services.
Step 2: Deduct sales returns, which are the amounts refunded to customers for returned goods.
Step 3: Subtract sales allowances, which are reductions in price given to customers due to issues like damaged goods or errors.
Step 4: Deduct sales discounts, which are reductions in price offered to customers for early payment or other promotional reasons.
Step 5: The resulting figure after these deductions is the 'Net Sales,' which provides a clearer picture of the revenue actually retained by the business.
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