Sales Revenue Minus Sales Returns And Allowances And Sales Discounts Equals What?

Sales Less Sales Discounts Less Sales Returns And Allowances Equals Multiple Choice Question (MCQ) / Net Sales = Gross Sales - Sales Allowances - Sales Returns - Sales Discounts / Sales Revenue Equals To What 

Sales Revenue Minus Sales Returns, Sales Allowances And Sales Discounts Equals To Net Sales.

The formula to calculate Net Sales is shown below:

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

Actually, sales allowance, returns and discounts are the Contra Revenue Accounts which are deducted from Gross or Total Sales in order to calculate net sales for the period.

For example, Mr. A, as the sole proprietor and seller, sold goods (5 chairs of Rs. 10000 each) worth Rs. 50000 to Mr. B, the customer, on account / credit. Later on Mr. B found that one chair is defective, one has some minor defects on it. Mr. B returned one chair of Rs. 10000 which is accepted by Mr. A. Mr. A gave the offer to Mr. B about sales discount of 2% on sales price of 3 chairs. Mr. A, lowered the price of one minor defective chair to Rs. 9200 which Mr. B accepted. Calculate Net Sales.

                            Here Sales Discount On 3 Chairs’s Sales Price = 5% X 30000 = Rs. 1500

                                          SR = 1 chair returned = Rs. 10000

                                           SA = Rs. 800

In Equation Form or in the form of formula, we have the following as shown below:

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

                                            = 50000 - 800 - 10000 - 1500

                          Net Sales = Rs. 37700

This amount of NS is recorded on Income Statement for the period to show true and fair view of NS to users of accounting information such as investors, creditors, management, etc.