BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following is an incorrect formula for a merchandising business?
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List price less trade discount is equal to gross invoice price.
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Sales less cost of goods available for sale is equal to gross profit.
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Sales less sales returns and allowances less sales discounts is equal to net sales.
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Gross margin less expenses is equal to net income.
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Explanation:
Detailed explanation-1: -Gross profit, which is also called gross margin, represents the company’s profit from selling merchandise before deducting operating expenses such as salaries, rent, and delivery expenses. Gross profit equals net sales minus the cost of goods sold.
Detailed explanation-2: -Revenue – Cost of Goods Sold – Expenses = Net Income The first part of the formula, revenue minus cost of goods sold, is also the formula for gross income.
Detailed explanation-3: -The cost of sales is calculated as beginning inventory + purchases-ending inventory.
There is 1 question to complete.