Net Credit Sales In Income Statement

Net credit sales are reflected on a company s income statement.

Net credit sales in income statement. Total sales minus merchandise expense equals gross profit a measure of top line growth. Net credit sales formula. Sales on credit sales returns sales allowances net credit sales. In the top line category you also find merchandise expense also known as cost of sale or cost of goods sold.

Credit sales flow into the top line section of a statement of profit and loss the other name for an income statement or statement of income. It forms an essential part of having to calculate ratios such as receivables turnover ratios as the net credit sales which is the credit sales after deducting the sales returns from customers goes on to be the numerator which is then divided by the receivables to arrive at the receivables turnover ratio. It is easiest to calculate net credit sales when cash sales are recorded separately in the accounting records from sales on credit. Before the statement is completed accounting entries are made in a company s general ledger that record the gross sales and any sales returns and allowances for the period.

These sales are essentially the same as net sales reported on the income statement in that they represent the gross amount less of all returns allowances and discounts. What is the definition of net credit sales. The formula for net credit sales is.