Net Sales & Net Earnings

Net Sales

In accounting, finance and bookkeeping, the net sales are the operating revenues which are earned by the business organization when it sells its products and services to the customers. Net sales are recorded in the statement of financial performance (income statement) as net sales or sales.  The first major part of a manufacturing or merchandising company’s multi-step income statement is net sales, often simply called as sales. Net sales consist of gross proceeds from sales (gross sales) less sales returns and allowances and any discounts allowed.  Gross sales consist of cash sales and total credit sales during an accounting period. Sales return and allowances are the cash refunds, credits on account and discounts from selling prices made to customers  who have received defective products or products that are otherwise unsatisfactory.  If other discounts are given to the customers, they also should be deducted from gross sales.

Net Earnings

Net earnings are generally called as net income, is the residual income of a company after adding the total gains and revenue and subtracting all losses and expenses for the reporting period. Net income could be distributed among the holders of the common stock as dividend or held by the company as an addition to the retained earnings. As earnings and profits are utilized synonymously for the income (also depending on United States usage and United Kingdom usage), net profit and net earnings are generally found as synonyms for the net income. Generally the term income is substituted for the net income; however this is not preferred because of the possible uncertainty.  The net earnings or net income is also called as bottom line since it is generally found on the bottom or last line of the firm's income statement. The items deducted would generally consist of minority interest, financing expense or interest expense and tax expense.

Questionnaire:

• What are net sales?
• What are net earnings of net income?