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 likely to have a positive effect on your company's profit with respect to net sales?

Decreasing sales returns and allowances

Increasing sales returns and allowances

Increasing sales discounts offered to customers

Increasing the amount of goods sold on credit that are later written off as uncollectible

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Verified step by step guidance

Understand the relationship between net sales and the factors that affect it. Net sales is calculated as:

Net Sales = Gross Sales - Sales Returns and Allowances - Sales Discounts

Analyze the impact of decreasing sales returns and allowances. A decrease in sales returns and allowances means fewer deductions from gross sales, which increases net sales and positively impacts profit.

Evaluate the effect of increasing sales returns and allowances. An increase in sales returns and allowances results in higher deductions from gross sales, reducing net sales and negatively affecting profit.

Consider the impact of increasing sales discounts offered to customers. Offering more discounts reduces the net sales amount, which can lower profit.

Assess the effect of increasing the amount of goods sold on credit that are later written off as uncollectible. Writing off uncollectible accounts increases expenses, which reduces profit, even though it does not directly affect net sales.