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 how Net Sales is calculated?

Net Sales = Gross Sales - Operating Expenses

Net Sales = Gross Sales + Cost of Goods Sold

Net Sales = Gross Sales + Sales Returns and Allowances

Net Sales = Gross Sales - Sales Returns and Allowances - Sales Discounts

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Verified step by step guidance

Understand the concept of Net Sales: Net Sales represent the revenue a company earns from its sales activities after accounting for deductions such as sales returns, allowances, and discounts.

Identify the components of Gross Sales: Gross Sales refer to the total sales revenue generated before any deductions are applied.

Recognize the deductions applied to Gross Sales: Sales Returns and Allowances are reductions in revenue due to returned goods or price adjustments, and Sales Discounts are reductions offered to customers for early payment or other incentives.

Formulate the equation for Net Sales: Net Sales = Gross Sales - Sales Returns and Allowances - Sales Discounts. This equation accounts for all necessary deductions to arrive at the actual revenue earned.

Apply the formula to calculate Net Sales: Subtract the total of Sales Returns and Allowances and Sales Discounts from Gross Sales to determine the Net Sales value.