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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

The difference between net sales and cost of goods sold is called

  1. (a) gross profit.
  2. (b) net purchases.
  3. (c) goods available for sale.
  4. (d) the bottom line.

To determine

Find the correct option, the option that indicates the correct term for the difference between the net sales and cost of goods sold.

Explanation

Net sales: The amount of price of merchandise sold during a certain period is referred to as sales revenue. Net sales is the gross sales, minus sales returns and allowances, and sales discounts.

Formula to compute net sales:

Net sales = Gross sales–Sales returns and allowances–Sales discounts

Cost of goods sold: The amount of cost of merchandise sold during a certain period is referred to as cost of goods sold.

Justification for correct answer: The excess of price of merchandise sold over the cost of merchandise sold is referred to as gross profit

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