PLEASE tell me if I have this right?

Question

This is all to put on a 1040
On September 1, Irene opened a retail store. The store uses cash method of accounting. Her income and expenses for the year are as follows:
Sales of merchandise $62,300
Inventory, Sep. 1 (purchased in August) 62,500
Inventory, Dec. 31 58,700
Purchases during the year 35,300
Sales returns and allowances(DO I ADD THIS TO INCOME?)
525
Store rental 7,500
Office expence 1,400
Insurance 1,000
Advertising 3,000
There is more, but it won't fit. Do I add everything but the Sales and Sales returns and then subtract it from the gross earnings? Thank you!!!

Answer 1

It looks right.

Answer 2

NO!

You have to establish your Cost of Goods Sold (CGS) before you can do anything with this.

Beginning inventory + purchases - ending inventory = CGS

Now figure net sales: Sales - returns & allowances = Net sales

Now figure gross income: Net Sales - CGS = Gross Income

Now figure total expenses. Add up the expenses.

Now figure net income: Gross Income - Expenses = Net Income

Answer 3

I think you need an accountant to help you with the business and not try cutting to many corners

Answer 4

you would subtract sales returns from income