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

Businesses can compensate employees for work they produce when being paid by which of the following methods, which would be deducted from gross sales to calculate net sales?

Interest income

Sales commissions

Depreciation expense

Inventory purchases

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Verified step by step guidance

Understand the concept of net sales: Net sales are calculated by subtracting certain expenses or deductions from gross sales. These deductions typically include items directly related to the sales process, such as sales returns, allowances, and sales commissions.

Identify the nature of each option provided: Interest income is not related to sales deductions; it is a financial income. Depreciation expense is related to the allocation of asset costs over time, not directly tied to sales. Inventory purchases are part of cost of goods sold, not a deduction from gross sales.

Focus on sales commissions: Sales commissions are payments made to employees or sales representatives based on the sales they generate. These are directly tied to the sales process and are deducted from gross sales to calculate net sales.

Relate sales commissions to the calculation of net sales: Since sales commissions are a direct expense incurred to generate sales, they are subtracted from gross sales to arrive at net sales.

Conclude that sales commissions are the correct method of compensation that would be deducted from gross sales to calculate net sales, as they are directly tied to the sales process.