- 1). Calculate the firm's gross sales. This can be done by multiplying the number of products sold by the price at which they were sold, and then adding up the total sales from each product offered by the business. For example, if a business sells two kinds of cakes priced at $10 and $12 and sold 1,000 and 2,000 units each, that business has made $34,000 in gross sales.
- 2). Calculate the business's total deductions from sales. Such deductions include returned products and the discounts and allowances made on products in order to sell them faster. For example, if the business had sold 500 of the $12 cakes at a $2 discount, that is a sales deduction of $1,000 from discounts.
- 3). Subtract sales deductions from gross sales in order to calculate net sales. Using the above examples, subtract $500 from $34,000 to produce $33,500 in net sales.
- 4). Add the cost of sales to gross profit in order to calculate net sales. Cost of sales is the cost of acquiring the products intended for sale that were sold by the business, and includes such items as direct labor costs, manufacturing overhead, raw materials, and purchase costs. For example, if the business had spent $20,000 to purchase the cakes that were sold and made a gross profit of $13,500, its net sales of $33,500 can be calculated by adding its cost of sales to its gross profit.
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