Gross vs. Net
Posted July 22, 2012on:
The term gross refers to the total amount made as a result of some activity. It can refer to things such as total profit or total sales.
Net (or Nett) refers to the amount left over after all deductions are made. Once the net value is attained, nothing further is subtracted. The net value is not allowed to be made lower.
Gross refers to the total and Net refers to the part of the total that really matters. For example, net income for a business is the profit after all expenses, overheads, taxes and interest payments are deducted from the gross income. Similarly, gross Weight refers to the total weight of the goods and the container and packaging. On the other hand, net weight refers to only the weight of the goods in question. For most food products, manufacturers print the net weight on the packaging for the benefit of consumers.
In economics, gross means before deductions (brutto), e.g. Gross Domestic Product (GDP) refers to the total market value of all final goods and services produced within a country in a given period of time (usually a calendar year). Net Domestic Product (NDP) refers to the Gross Domestic Product (GDP) minus depreciation on a country’s Capital (economics) goods. (The NDP is thus, in effect, an estimate of how much the country has to spend to maintain the current GDP.)
In accounting, for a P&L (Profit and Loss) statement, Gross profit, or Gross income, or Gross operating profit is the difference between revenue and the cost of making a product or providing a service, before deducting overheads, payroll, taxation, and interest payments. Net profit is equal to the gross profit minus overheads minus interest payable plus one off items for a given time period.
For a business, income refers to net profit i.e. what remains after expenses and taxes are subtracted fromrevenue. Revenue is the total amount of money the business receives from its customers for its products and services. For individuals, however, “income” generally refers to the total wages, salaries, tips, rents, interest or dividend received for a specific time period.
When income is represented as a percentage of revenue, it’s called profit margin.