Net Sales

Net sales is defined as gross sales minus discounts, minus allowances, minus returns. These is all accounting terminology. Simply put, gross sales is the listed price times units sold and net sales is the amount actually paid. Financial statements typically report only "sales" as that is the amount received for the product/service sold. For example, a car dealership may count the number of cars sold and count the sticker price for a gross sales figure but the actual agreed upon price paid after the negotiated price discounts would be the net sales figure. Where price concessions are at the point of purchase, the math is very straight forward and the price paid becomes the net sales amount. When the discount is applied in the form of a rebate to retroactively apply a price concession towards the sale that can complicate the math. The complexity escalates when the rebate is contingent to a performance measure, such as volume purchased or market share, especially the longer the gap between purchase date and rebate payment. While the immediate calculation is straight forward, the accounting and financial projections are complicated.