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

Net revenues (net sales) is calculated as total revenues minus which of the following items?

Operating expenses

Sales returns, sales allowances, and sales discounts

Interest expense

Cost of goods sold

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Verified step by step guidance

Understand the concept of net revenues (net sales): Net revenues represent the actual income generated from sales after accounting for certain deductions. It is a key metric used to evaluate the effectiveness of a company's sales operations.

Identify the deductions that are subtracted from total revenues to calculate net revenues: These deductions typically include sales returns, sales allowances, and sales discounts. These items reduce the gross revenue to reflect the actual revenue earned.

Clarify the meaning of sales returns, sales allowances, and sales discounts: Sales returns refer to goods returned by customers, sales allowances are reductions in price due to product defects or other issues, and sales discounts are reductions in price offered to customers for early payment or promotional purposes.

Differentiate net revenues from other financial metrics: Operating expenses, interest expense, and cost of goods sold are not subtracted to calculate net revenues. These items are accounted for in other parts of the income statement, such as operating income or net income.

Summarize the formula for net revenues: Net revenues = Total revenues - (Sales returns + Sales allowances + Sales discounts). This formula ensures that the reported revenue reflects the actual income generated from sales transactions.