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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following best describes how Net Sales is calculated on the income statement?

Net Sales = Gross Sales + Sales Returns and Allowances

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

Net Sales = Gross Sales - Operating Expenses

Net Sales = Gross Sales + Cost of Goods Sold

Previous problemNext problem

Verified step by step guidance

Understand the concept of Net Sales: Net Sales represent the actual revenue a company earns from its sales after accounting for deductions such as sales returns, allowances, and discounts.

Identify the components of the formula: Gross Sales, Sales Returns and Allowances, and Sales Discounts. Gross Sales refer to the total revenue from sales before any deductions. Sales Returns and Allowances are reductions in revenue due to returned goods or price adjustments. Sales Discounts are reductions offered to customers for early payment or other reasons.

Recall the correct formula for Net Sales: Net Sales = Gross Sales - Sales Returns and Allowances - Sales Discounts.

Analyze the incorrect options: For example, 'Net Sales = Gross Sales + Sales Returns and Allowances' is incorrect because returns and allowances reduce revenue, not increase it. Similarly, 'Net Sales = Gross Sales - Operating Expenses' is incorrect because operating expenses are not part of the Net Sales calculation. Lastly, 'Net Sales = Gross Sales + Cost of Goods Sold' is incorrect because Cost of Goods Sold is subtracted later in the income statement to calculate Gross Profit, not Net Sales.

Apply the correct formula to calculate Net Sales in practice: Subtract Sales Returns and Allowances and Sales Discounts from Gross Sales to determine the Net Sales figure for the income statement.