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 subtracted from gross sales to calculate net sales on the income statement?

Interest expense

Cost of goods sold

Sales returns and allowances

Operating expenses

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Verified step by step guidance

Understand the concept of gross sales: Gross sales represent the total revenue generated from sales before any deductions.

Learn about net sales: Net sales are calculated by subtracting specific deductions from gross sales. These deductions typically include sales returns, allowances, and discounts.

Identify the correct deduction: Sales returns and allowances are subtracted from gross sales because they represent reductions in revenue due to returned goods or price adjustments.

Clarify why other options are incorrect: Interest expense, cost of goods sold, and operating expenses are not subtracted from gross sales to calculate net sales. These items are accounted for later in the income statement under different categories.

Apply the formula for net sales: Net Sales = Gross Sales - Sales Returns and Allowances - Discounts (if applicable).