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

To determine a firm's net sales, which of the following must be subtracted from gross sales?

Operating expenses

Sales returns, allowances, and discounts

Cost of goods sold

Interest expense

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Verified step by step guidance

Understand the concept of gross sales: Gross sales represent the total revenue generated from sales before any deductions.

Identify the components that need to be subtracted to calculate net sales: Net sales are derived by subtracting sales returns, allowances, and discounts from gross sales.

Clarify the terms: Sales returns refer to products returned by customers, allowances are reductions in price due to defects or other issues, and discounts are reductions in price offered to customers.

Exclude unrelated items: Operating expenses, cost of goods sold, and interest expense are not deducted from gross sales to calculate net sales. These are accounted for in other parts of the financial statements.

Apply the formula for net sales: Net Sales = Gross Sales - (Sales Returns + Allowances + Discounts).