A.

Gross Sales, Net Sales and

Refunds and allowance
Gross Sales = the total amount received for good sold over a period of time.
Net Sales = the amount remaining after deducting refunds from the gross sales .
Refunds and allowances = contra-revenue account deducted from sales. It is a sales adjustments
account that represents merchandise returns from customers, and deduction to the original selling
price when the customer accepts defective products.
= When customers return goods because they are defective, the
customers are given refunds. This item is known as Refunds and Allowances and decreases gross sales
Formula: Gross Sales, Net Sales
and Refunds and allowance
NS = GS –RA

Where: GS= Gross Sales

NS = Net Sales
RA = Refunds and allowances
Example:

 1. Julie’s fruit stand had gross sales of Ᵽ89,622.50 during a certain week.
Ifshe Refunds and allowances amounted to Ᵽ8,501.90, how much was the net
sales?
 Solution: Given: GS = Ᵽ89,622.50
RA = Ᵽ8,501.90,

NS = ?

NS = GS –RA

= Ᵽ89,622.50 - Ᵽ8,501.90

= Ᵽ81,120.60
Cost of Goods Sold, Cost of Goods for Sale, Beginning
Inventory, Ending Inventory, and Purchases

 To determine the cost of goods sold, inventories are taken at the beginning and end of the
period under consideration. The Inventory made at the beginning of the period is called
Beginning Inventory., while the inventory taken at the end of the period is called Ending
Inventory.
Formulas: Cost of Goods Sold, Cost of Goods for Sale,
Beginning Inventory, Ending Inventory, and Purchases

 CGFS = BI + P CGS = CGFS – EI

 Where :
CGFS = cost of Goods for Sale
CGS = cost of Goods Sold
P = Purchases
BI = Beginning Inventory
EI = Ending Inventory
Examples:

 1. At the end of June, the inventory of GOODWELL Bookstore was Ᵽ396,170

while the purchases during the month was Ᵽ547,812. If the ending inventory
during the month of May was Ᵽ953,432, what is the cost of goods sold?
 Given: BI = Ᵽ953,432 EI = Ᵽ396,170 P = Ᵽ547,812
 CGFS = BI + P CGS = CGAS-EI
 =953,432 + Ᵽ547,81 = 1,150,244 – 396,170
CGFS = Ᵽ1,150,244.00 = Ᵽ1,105,074.00
GROSS PROFIT, NET PROFIT, OPERATING
EXPENSE
 In the operations of business, expenses such as rent, salaries, advertisement,
etc. are being incurred. These expenses are called Operating Expense,
Overhead or Selling Expense. These expenses decrease Gross Profit to Net
Profit.
 Formula: Gross profit, Net profit, Operating Expense
 GP = NS – CGS NP = GP – OE
 Where:
 GP =Gross profit
 NP = Net profit
 OE = Operating Expense
Example:

 The Mercury Drug Store, during a certain month, had net sales amounting to Ᵽ
349,650 and a cost of goods sold of Ᵽ 297,805. How much is the gross profit?
If operating expenses during the month amounted to Ᵽ 25,618, what is the
net profit?
 Solution:
 Given NS = Ᵽ 349,650 CGS = Ᵽ 297,805 OE = Ᵽ 25,618
 GP = ? NP = ?
 GP = NS – CGS NP = GP-OE
 = Ᵽ 349,650 - 297,805 = 51,845 – 25,618
 GP = Ᵽ 51,845 NP = Ᵽ 26,227
Solve the following problems:

 1. the beginning inventory of TARR company was Ᵽ 2,434,400 and purchases

during the period amounted to Ᵽ5261,300. what was the cost of goods
available for sale?
 2. the gross sales of MARIGOLD Trading for the first quarter of the year
amounted to Ᵽ 8,284,000 and the sales returns and allowances totaled Ᵽ
313,900. find the net sales?
 3. if the net sales of SMARTGOODS Products amounted to Ᵽ84,380,000 and the
cost of goods sold was Ᵽ49,205,000, what was the gross profit?
Solve the following:

 4. the records of International Bookstore showed that the following for the
year ending December 31: stock of goods, January 1, Ᵽ1,900,000.00; stock of
goods, December 31, Ᵽ2,600,000. Operating Expense, Ᵽ2,350,250; Purchases,
Ᵽ3,980,560; Net sales, Ᵽ8,237,090. Find cost of goods for sale ; Gross Profit;
Cost of Goods sold and Net Profit
 5. The inventory dated April 1, 2019 of AAA Company was Ᵽ7,039,947 and
purchase during the second quarter period amounted to Ᵽ28,849,038. what
was the cost of goods for sale on the second quarter
Solve the following:

6. The cost of goods for sale of Mariane Products Inc. during the first quarter of
2018 was Ᵽ25,400,902 and the first quarter ending inventory amounted to
Ᵽ4,915,702. what was the cost of goods sold?
7. The gross sales of GOLDEN STAR Trading for the third quarter of 2019
amounted to 33,048,289 and the returns and allowances totaled Ᵽ958,103. find
the net sales.
8. The records of Lopez and Sons during the first quarter show the following:
Merchandise of January 1, Ᵽ30,049,104 purchases during the period amounted to
Ᵽ85,228,290, merchandise on hand March 31, Ᵽ16,480,825. what was the cost of
goods sold?