Net Credit Sales On Income Statement

Goes into ratio analysis.

Net credit sales on income statement. In the top line category you also find merchandise expense also known as cost of sale or cost of goods sold. Net credit sales formula. What is the definition of net credit sales. It is easiest to calculate net credit sales when cash sales are recorded separately in the accounting records from sales on credit.

Total sales minus merchandise expense equals gross profit a measure of top line growth. Net credit sales are reported on the income statement as net sales and added to other net revenues to arrive at a total revenue figure. 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. 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.

Also sales returns and sales allowances should be recorded in separate accounts or at least aggregated into a separate account. Sales on credit sales returns sales allowances net credit sales. The formula for net credit sales is.