What is net sales?

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Net sales is basically the same as gross sales but minus three deductions

1.  Sales allowances

2.  Discounts

3.  Sales returns

 

Gross Sales £8,000
Sales Allowances £2,000
Discounts £1,500
Sales Return N/A
   
Net Sales £4,500
   
   

 

If the customer makes a sales return for a full refund

Gross Sales £5,000
Sales Return £5,000
   
Net Sales £0,000

 

In total, these deductions are the difference between gross sales and net sales.  If a company does not record sales allowances, sales discounts, or sales returns, there is no difference between gross sales and net sales

If the difference between the two figures gradually increases over time, it can indicate problems with your products that are generating unusually large sales returns and allowances.  Ideally, you'd want the gap between your gross sales and net sales to be as small as possible.

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