What is the Net Credit Sales Formula?

Net Credit Sales Formula

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Net Credit Sales Formula

Net credit sales refer to a company’s revenue from sales made on credit (not including cash sales) after accounting for any sales returns or allowances. It is used to calculate a number of important financial metrics, such as the accounts receivable turnover ratio.

The formula for calculating net credit sales is:

Net Credit Sales = Gross Credit Sales – Sales Returns – Sales Allowances


This data is usually found in a company’s financial statements or can be obtained from the accounting department.

Example of the Net Credit Sales Formula

Let’s say we have a company called ABC Corp that primarily operates on credit sales. Over the course of a year, their records show:

  • Gross Credit Sales: $500,000
  • Sales Returns: $20,000 (products that were returned by customers)
  • Sales Allowances: $10,000 (discounts given due to minor product defects or negotiated deals)

Using the formula for net credit sales:

Net Credit Sales = Gross Credit Sales – Sales Returns – Sales Allowances

We can substitute the given values:

Net Credit Sales = $500,000 – $20,000 – $10,000 = $470,000

So, ABC Corp’s net credit sales for the year amount to $470,000. This is the revenue the company has earned from credit sales after accounting for returned goods and allowances.

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