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

Gross profit equals the difference between:

Net sales and operating expenses

Net sales and net income

Cost of goods sold and operating expenses

Net sales and cost of goods sold

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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 (total revenue from goods or services sold) and the cost of goods sold (COGS). It measures the profitability of a company's core operations before accounting for operating expenses, taxes, and other costs.

Identify the components: Net sales refers to the total revenue generated from sales after deducting returns, allowances, and discounts. Cost of goods sold (COGS) includes the direct costs associated with producing or purchasing the goods sold by the company, such as materials and labor.

Set up the formula for gross profit: The formula is Gross Profit = Net Sales - Cost of Goods Sold. This formula helps calculate the profit generated from selling goods or services before considering other expenses.

Clarify why other options are incorrect: Operating expenses are not part of the gross profit calculation because they are considered after gross profit is determined. Similarly, net income includes all expenses and revenues, making it a broader metric than gross profit.

Apply the formula: To calculate gross profit, subtract the cost of goods sold from net sales. Ensure you have accurate figures for both net sales and COGS to perform the calculation correctly.