Professional Documents
Culture Documents
There are three calculated amounts on the multi-step income statement for a merchandiser - net sales, gross profit, and net income.
Net Sales = Sales - Sales Returns - Sales Discounts
Gross Profit = Net Sales - Cost of Merchandise Sold
Net Income = Gross Profit - Operating Expenses
Net sales is the actual sales generated by a business. It represents everything that “went out the door” in sales minus all that came
back in returns and in the form of sales discounts.
Gross profit is the same as “markup.” It is the difference between what a company paid for a product and what it sells the product
for to its customer.
Net income is the business’s profit after all expenses have been deducted from the net sales amount.
A more complex manufacturing business may break out its operating expenses into two categories on the income statement: selling
expenses and administrative expenses. Selling expenses are related to the people and effortsused to market and promote the
product to customers. Administrative expenses relate to the general management of the business and may include costs such as the
company president’s office and the human resources and accounting departments. An example is shown below.
3.2.1 https://biz.libretexts.org/@go/page/43070
This page titled 3.2: Merchandising Income Statement is shared under a CC BY-SA 4.0 license and was authored, remixed, and/or curated by
Christine Jonick (GALILEO Open Learning Materials) via source content that was edited to the style and standards of the LibreTexts platform; a
detailed edit history is available upon request.
3.2.2 https://biz.libretexts.org/@go/page/43070