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How to Calculate Net Sales.
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How to Calculate Net Sales.

Rosemary Njeri

Net sales are total sales after subtracting discounts , returned goods, and allowances.

The net sales figures are usually taken into account by investors when they’re evaluating whether to invest in a business as it is the more accurate figure in determining the revenue a company receives from sales.

Formula to calculate net sales.

Calculate Net Sales.

Gross sales – This refers to the unadjusted amount of sales revenue a company earns.

Discounts – These are rewards that extend to customer invoices when they meet certain criteria.

Sales returns – This implies that a customer returns unwanted goods to get a refund from the company.

Allowances – This represents a price reduction that occurs when goods are damaged, defective or their value is otherwise reduced for reasons other than discounting.

Example:

A textile company made gross sales amounting to $2 million. Discounts amounting to $200,000 was rewarded to regular customers. The value of the dress making materials returned amounted to $50,000. The bulk buyers were allowed allowances that amounted to $50,000. Determine the net sales of the company for that year.

Calculate Net Sales.

Therefore, the net sales amount of the is $ 1,700,000.

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