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

1. Which of the following is subtracted from total sales to calculate net sales on the income statement?

Operating expenses

Sales returns and allowances

Interest expense

Cost of goods sold

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Verified step by step guidance

Understand the concept of net sales: Net sales represent the revenue generated from sales after deducting certain items such as sales returns, allowances, and discounts.

Identify the components that are subtracted from total sales to calculate net sales: Sales returns and allowances are reductions in revenue due to returned goods or price adjustments.

Clarify why operating expenses, interest expense, and cost of goods sold are not subtracted to calculate net sales: These items are part of other sections of the income statement, such as operating expenses and cost of goods sold, which are deducted later to calculate net income.

Relate the calculation of net sales to the income statement structure: Net sales are calculated at the top of the income statement, before deducting operating expenses, interest expense, and cost of goods sold.

Conclude that sales returns and allowances are the correct items subtracted from total sales to calculate net sales, as they directly reduce the revenue figure.