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Multiple Choice
Net sales income is measured as:
A
Total sales minus cost of goods sold
B
Total sales plus cost of goods sold
C
Total sales plus sales returns and allowances
D
Total sales minus sales returns, allowances, and discounts
Verified step by step guidance
1
Understand the concept of net sales: Net sales represent the revenue generated from sales after accounting for deductions such as sales returns, allowances, and discounts.
Identify the components of total sales: Total sales refer to the gross revenue from all sales transactions before any deductions.
Define sales returns and allowances: Sales returns are the value of goods returned by customers, while allowances are reductions in price due to issues like damaged goods.
Define sales discounts: Sales discounts are reductions in the selling price offered to customers for early payment or other reasons.
Calculate net sales: Subtract the sum of sales returns, allowances, and discounts from total sales using the formula: .