What is the formula for net credit sales?

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Meaning and Explanation

Credit sales refer to the total value of sales that an organization (or) company makes on credit. If the company offers any discount to its customers on the credit sale of goods (or) if sales returns occur, then such amounts must be deducted from the total value of credit sales to arrive at Net credit sales figure.

In simple terms, net credit sales refer to the total revenue generated by the company when it sells goods and services to its customers on credit, reducing the amount of sales allowance and sales return from the total credit sales.

 

Net Credit Sales Formula

Net Credit Sales Formula

Total Credit Sales = Amount of total sales made on a credit basis

(reduce) Sales Returns = All returns received from buyers

(reduce) Discount on Sales = Any discounts offered on invoice

 

Example on How to Calculate Net Credit Sales

Apple inc. furnishes you with the following sales information. Calculate the value of Net credit sales.

Particulars Amount
Total Sales 4,50,000
Cash Sales 1,50,000
Credit Sales 3,00,000
Goods Returned by Customers 1,00,000
Sales Allowance/Discount 60,000

Net Credit Sales = Credit Sales – Sales Returns – Discount allowed on Sales

= 3,00,000 – 1,00,000 – 60,000

= 1,40,000