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 is derived by subtracting the cost of goods sold (COGS) from net sales?

Gross Profit

Total Revenue

Net Income

Operating Income

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Verified step by step guidance

Understand the concept of Gross Profit: Gross Profit is a financial metric that represents the difference between net sales and the cost of goods sold (COGS). It measures the profitability of a company's core operations before accounting for other expenses such as operating costs, taxes, and interest.

Identify the formula for Gross Profit: The formula is Gross Profit = Net Sales - Cost of Goods Sold (COGS). This calculation isolates the profit generated from selling goods or services after accounting for the direct costs of production.

Clarify the term 'Net Sales': Net Sales refers to the total revenue generated from sales after deducting returns, allowances, and discounts. It represents the actual income from sales activities.

Explain the term 'Cost of Goods Sold (COGS)': COGS includes all direct costs associated with producing goods or services, such as materials, labor, and manufacturing expenses. It does not include indirect costs like administrative expenses or marketing costs.

Apply the formula to the problem: To determine Gross Profit, subtract the COGS from Net Sales using the formula Gross Profit = Net Sales - COGS. This calculation will yield the Gross Profit, which is the correct answer to the question.