Multiple Choice
Which of the following best describes how 'Net Sales' is calculated on the income statement?
23
views
4. Merchandising Operations
Net Sales
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
Which of the following is not deducted from gross sales to calculate net sales?
A
Sales Allowances
B
Sales Returns
C
Sales Discounts
D
Cost of Goods Sold
Verified step by step guidance1
Step 1: Understand the concept of gross sales and net sales. Gross sales represent the total revenue generated from sales before any deductions. Net sales are calculated by subtracting specific deductions from gross sales.
Step 2: Identify the common deductions from gross sales to calculate net sales. These typically include Sales Allowances (reductions in price due to product issues), Sales Returns (products returned by customers), and Sales Discounts (price reductions offered to customers for early payment or promotional purposes).
Step 3: Recognize that Cost of Goods Sold (COGS) is not a deduction used to calculate net sales. COGS represents the direct costs of producing goods sold by a company, and it is subtracted from net sales to calculate gross profit, not net sales.
Step 4: Review the relationship between these terms. Net sales = Gross sales - (Sales Allowances + Sales Returns + Sales Discounts). COGS is not part of this formula.
Step 5: Conclude that the correct answer is Cost of Goods Sold, as it is not deducted from gross sales to calculate net sales.
9:04mWatch next
Master Net Sales:Sales Discounts (Gross Method) with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
