Subtracting returns and discounts from gross sales yields which metric?

Subtracting returns and discounts from gross sales yields which metric?

• A. Net Sales
• B. Net Income
• C. Gross Revenue
• D. Cost of Goods Sold

Answer: (A)

Subtracting returns and discounts from gross sales gives net sales. Gross sales is the total revenue billed from sales; when customers return goods or receive discounts, those amounts reduce that revenue. What remains is net sales (often called net revenue), the actual revenue the company recognizes from its sales activities. Net income is broader, since it subtracts all other expenses and taxes from net sales, so it’s not just the effect of returns and discounts. Gross revenue is typically used to mean revenue before these deductions, and cost of goods sold is the expense tied to producing the goods, which is subtracted from net sales to get gross profit.

Subtracting returns and discounts from gross sales gives net sales. Gross sales is the total revenue billed from sales; when customers return goods or receive discounts, those amounts reduce that revenue. What remains is net sales (often called net revenue), the actual revenue the company recognizes from its sales activities. Net income is broader, since it subtracts all other expenses and taxes from net sales, so it’s not just the effect of returns and discounts. Gross revenue is typically used to mean revenue before these deductions, and cost of goods sold is the expense tied to producing the goods, which is subtracted from net sales to get gross profit.