Question

How are sales reported on the income statement? 1. Sales are shown for 3 years net of returns and allowances. 2. Sales amounts are inflation-adjusted. 3. Sales are shown for 2 years and are reported in nominal terms. 4. Sales are shown at gross amounts, adjusted for inflation.

Answer 1

1. Sales are shown for 3 years net of returns and allowances.

Step-by-step explanation:

Sales reporting must be actual sales for which the firm received value and must be net of all discounts and allowances including sales returns. In reporting sales, comparative figures is also reported for easy comparison and performance measurement by the entity and other interested stakeholders. Investors use the comparative figures to analyse business performance and choose the best among several alternatives