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 the correct formula to calculate net sales on the income statement?

Net Sales = Sales Revenue + Sales Returns and Allowances + Sales Discounts

Net Sales = Sales Revenue - Cost of Goods Sold

Net Sales = Sales Revenue + Cost of Goods Sold

Net Sales = Sales Revenue - Sales Returns and Allowances - Sales Discounts

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Verified step by step guidance

Understand the concept of Net Sales: Net Sales represent the actual revenue a company earns from its sales activities after accounting for deductions such as sales returns, allowances, and discounts.

Identify the components of the formula: Net Sales is calculated by starting with Sales Revenue and subtracting Sales Returns and Allowances, as well as Sales Discounts.

Break down the formula: The formula for Net Sales is expressed as:

Net Sales = Sales Revenue - Sales Returns - Sales Discounts

. This ensures that all deductions are properly accounted for.

Compare the given options: Evaluate each option provided in the problem and identify which one matches the correct formula for Net Sales. The correct formula is: Net Sales = Sales Revenue - Sales Returns and Allowances - Sales Discounts.

Apply the formula in practice: To calculate Net Sales, gather the values for Sales Revenue, Sales Returns and Allowances, and Sales Discounts from the income statement or accounting records, and substitute them into the formula.