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

What is value added and how is it calculated? Value added refers to:

The total amount of sales revenue before any deductions for returns or allowances.

The profit earned after deducting all operating expenses from net sales.

The sum of all expenses incurred in producing goods or services.

The difference between a company's net sales and the cost of goods and services purchased from other firms.

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Verified step by step guidance

Understand the concept of value added: Value added represents the economic value a company creates by transforming raw materials and services purchased from other firms into finished goods or services. It is a measure of the company's contribution to the production process.

Identify the formula for calculating value added: Value added is calculated as the difference between a company's net sales (total revenue from goods or services sold) and the cost of goods and services purchased from other firms.

Break down the components: Net sales are the total revenue generated from sales after deducting returns, allowances, and discounts. The cost of goods and services purchased from other firms includes expenses for raw materials, outsourced services, and other inputs acquired externally.

Apply the formula: Subtract the cost of goods and services purchased from other firms from the net sales to determine the value added. The formula can be expressed as:

Value Added = Net Sales - Cost of Goods and Services Purchased

Interpret the result: The calculated value added reflects the company's ability to generate economic value through its operations, which can be used to assess its efficiency and contribution to the economy.