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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following best describes 'net sales' for a sole proprietorship?

Total cash received from customers during the period

Net income after deducting all expenses from total revenue

Total sales revenue before any deductions

Total sales revenue minus sales returns, allowances, and discounts

Previous problemNext problem

Verified step by step guidance

Understand the concept of 'net sales': Net sales represent the total revenue generated from sales after deducting sales returns, allowances, and discounts. It is a key metric for evaluating the actual revenue earned from sales activities.

Identify the components that affect net sales: These include sales returns (products returned by customers), sales allowances (price reductions for defective or damaged goods), and sales discounts (reductions offered for early payment or promotional purposes).

Recognize the formula for calculating net sales: Net Sales = Total Sales Revenue - Sales Returns - Sales Allowances - Sales Discounts.

Clarify why the other options are incorrect: 'Total cash received from customers during the period' refers to cash flow, not net sales. 'Net income after deducting all expenses from total revenue' refers to net income, not net sales. 'Total sales revenue before any deductions' refers to gross sales, not net sales.

Apply the definition to the correct answer: Net sales are best described as 'Total sales revenue minus sales returns, allowances, and discounts,' which aligns with the formula and concept explained above.