Net Credit Sales

Net credit sales represent the total sales made by a company on credit, minus returns and allowances. These sales are made on credit terms, meaning customers are given a specific period to pay for goods or services. Net credit sales are important for calculating the accounts receivable turnover ratio, which measures how efficiently a company collects payments from customers. High net credit sales indicate a reliance on credit terms for business transactions.

Example

A company reports $500,000 in total sales, with $100,000 of that being cash sales. After deducting $10,000 in returns, the company has $390,000 in net credit sales.