Multiple Choice
Which of the following best describes the effect of a cash discount taken by the customer on net sales?
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4. Merchandising Operations
Net Sales
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Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following best defines 'Net Sales' in financial accounting?
A
Amount of money awarded to students based on certain financial need criteria
B
Total cash received from customers during the period
C
Total sales revenue before any deductions
D
Total sales revenue minus sales returns, allowances, and discounts
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.
Sales returns are the amounts refunded to customers for returned goods. These need to be subtracted from the total sales revenue.
Sales allowances are reductions in the selling price due to minor defects or issues with the product. These also need to be deducted from the total sales revenue.
Sales discounts are reductions in the price offered to customers for early payment or other promotional reasons. These discounts are subtracted from the total sales revenue.
Combine the deductions (sales returns, allowances, and discounts) and subtract them from the total sales revenue to calculate Net Sales. The formula is: Net Sales = Total Sales Revenue - (Sales Returns + Sales Allowances + Sales Discounts).
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