what gross sales can tell you
gross sales can be important especially for retail stores but it is not the final word on a company s revenue it reflects a business s total revenue during a specific period but does not account for all the expenses accrued this is why gross sales are not typically listed on an income statement or listed as total revenue net sales reflect a truer picture of a company s top line nevertheless analysts often find it helpful to plot gross sales net sales and the difference between both figures to determine how each value trends over a period if the difference between gross and net sales increases over time this could indicate trouble with product quality this is because it suggests an unusually high volume of sales returns discounts or allowances these figures should be watched to determine their meaning example of how to use gross salesmost companies don t provide gross sales in their publicly filed financial statements instead it s generally used as an internal number for example companies like dollar general corp dg or target corp tgt are well known retailers however they offer discounts and experience product returns these companies and many others choose not to report gross sales instead they present net sales on their financial statements net sales already have discounts returns and other allowances factored in gross sales vs net salesgross sales are the total sales transactions within a specific period for a company net sales are calculated by deducting sales allowances sales discounts and sales returns from gross sales 1net sales reflect all customer price reductions discounts on goods and any refunds paid to customers after the sale these three deductions have a natural debit balance while the gross sales account has a natural credit balance thus the deductions are constructed to offset the sales account limitations of using gross salesgross sales are generally only significant to companies in the consumer retail industry reflecting the amount of a product a business sells relative to its major competitors a company may decide to present gross sales deductions and net sales on different lines within an income statement however this is generally more confusing so net sales are typically the only value presented the figure can be misleading when gross sales are presented on a separate line because it tends to overstate sales and inhibits readers from determining the total of the various sales deductions 