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 best represents the amount of money a company actually has available from its sales after deducting returns, allowances, and discounts?

Operating Income

Gross Sales

Accounts Receivable

Net Sales

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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 after deducting returns, allowances, and discounts. It provides a clearer picture of the company's effective sales performance.

Identify the components that affect Net Sales: These include Gross Sales (total sales before deductions), Sales Returns (products returned by customers), Sales Allowances (price reductions for defective or damaged goods), and Sales Discounts (reductions for early payment or promotional offers).

Apply the formula for Net Sales: Net Sales = Gross Sales - Sales Returns - Sales Allowances - Sales Discounts. This formula helps calculate the actual revenue available to the company.

Compare Net Sales with other terms: Operating Income refers to profit after operating expenses, Gross Sales is the total sales before deductions, and Accounts Receivable is the money owed by customers. None of these terms directly represent the actual revenue after deductions like Net Sales does.

Conclude that Net Sales is the correct term: Based on the definition and formula, Net Sales best represents the amount of money a company has available from its sales after deducting returns, allowances, and discounts.