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 the difference between gross income and net income for a company?

Gross income is calculated after deducting taxes, while net income is calculated before taxes.

Gross income is the same as net sales, while net income is total revenue before any deductions.

Gross income includes all revenues and expenses, while net income only includes operating revenues.

Gross income is total revenue minus cost of goods sold, while net income is gross income minus all other expenses, including operating expenses, interest, and taxes.

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Verified step by step guidance

Step 1: Understand the concept of gross income. Gross income is calculated as total revenue minus the cost of goods sold (COGS). It represents the profit a company makes from its core business operations before deducting other expenses.

Step 2: Understand the concept of net income. Net income is derived from gross income by subtracting all other expenses, including operating expenses, interest, and taxes. It represents the company's final profit or loss for a given period.

Step 3: Compare gross income and net income. Gross income focuses on the profitability of core business operations, while net income provides a comprehensive view of the company's overall financial performance after accounting for all expenses.

Step 4: Analyze the options provided in the problem. Eliminate incorrect statements by comparing them to the definitions of gross income and net income. For example, gross income is not calculated after deducting taxes, and net income is not calculated before taxes.

Step 5: Identify the correct answer. The correct description is: 'Gross income is total revenue minus cost of goods sold, while net income is gross income minus all other expenses, including operating expenses, interest, and taxes.'