Gross profit on sales is calculated by subtracting
A) sales returns and allowances from sales.
B) cost of goods sold from net sales.
C) ending inventory from the total merchandise available for sale.
D) total expenses from sales.

Question

Quizplus · Accepted Answer

Gross profit on sales is calculated by subtracting the cost of goods sold from net sales. This calculation gives the profit generated specifically from the sale of goods, before taking into account any other expenses such as operating expenses or taxes. Option A is incorrect because sales returns and allowances are deducted from sales to arrive at net sales, which is then used in the gross profit calculation. Option C is incorrect because ending inventory is used in the calculation of cost of goods sold, not in the calculation of gross profit on sales. Option D is incorrect because total expenses are not involved in the calculation of gross profit on sales.

Gross Profit on Sales Is Calculated by Subtracting