Multiple Choice
Which of the following best describes how net sales are calculated on the income statement?
21
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 is subtracted from gross sales to calculate net sales?
A
Cost of goods sold
B
Interest expense
C
Sales returns and allowances
D
Operating expenses
Verified step by step guidance1
Understand the concept of gross sales: Gross sales represent the total revenue generated from sales before any deductions.
Learn the definition of net sales: Net sales are calculated by subtracting specific deductions from gross sales, such as sales returns, allowances, and discounts.
Identify the correct deduction: Sales returns and allowances are subtracted from gross sales because they represent reductions in revenue due to returned goods or price adjustments.
Clarify why other options are incorrect: Cost of goods sold, interest expense, and operating expenses are not subtracted from gross sales to calculate net sales. These are used in other parts of the income statement, such as calculating gross profit or net income.
Apply the formula for net sales: Net Sales = Gross Sales - Sales Returns and Allowances - Discounts (if applicable).
9:04mWatch next
Master Net Sales:Sales Discounts (Gross Method) with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
