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Net sales (also known as net revenue) is the actual amount of sales done by a company in a given period of time. It is the amount of sales left after subtracting the amount of sales return, discount and allowances for damaged goods from gross sales.
The amount of net revenue is shown on the income statement of company. This value is used to calculate gross profit, operating profit and net profit for a company.
Formula for the calculation of net sales:
Net sales = Gross sales – (Sales return + Discount on sales + Allowance for damaged and missing goods)
Example:
Let’s suppose, XYZ ltd reports gross sales of INR 1,00,000, sales return of INR 10,000, discount on sales of INR 15,000 and allowance of INR 12,000 for financial year 2016 – 2017.
Net revenue for XYZ ltd for the financial year 2016 – 2017
= 1,00,000 – (10,000 + 15,000 + 12,000) = INR 63,000.