Net Sales

Last updated 29th Nov 2022


The financial accounting term net sales is used to describe revenues after accounting for returns, discounts, and allowances for factors like damaged or missing goods. The net sales line item appears on a company's income statement.


Net Sales = Revenues (Gross Sales) - Sales Returns and Allowances


Net sales is a restatement of sales (or revenues), and more accurately reflects the stream of money that flows into the company. The adjustment is necessary to account for consumer returns of merchandise.

This metric is frequently used by management to measure customer satisfaction with a product. This is done by examining and tracking the percentage of sales returns:

Sales Returns (%) = (Sales Returns and Allowances / Gross Sales) x 100

If the value of sales returns appears high relative to benchmarks, the company can conduct research to determine the source of the product dissatisfaction.


The table below demonstrates how net sales would appear in a company's income statement:

Gross Sales29,936,000Less: Sales Returns and Allowances(325,000)Net Sales29,611,000Cost of Goods Sold15,693,000Gross Profit13,918,000

Related Terms

income statement, revenues, cost of goods sold, sales returns and allowances

Moneyzine Editor

Moneyzine Editor