Gross earnings is the total amount of income earned over a period of time by an individual/household or a company. For individuals and households, These are the income earned before the deduction of taxes or adjustments. In the corporate world, it’s an accounting convention that refers to a public company’s gross profit or the amount left from total revenues over a specified time period once the cost of goods sold (COGS) is deducted.
Gross Earnings Formula
Gross Earning = Total Revenue – Cost of Goods Sold
- Total Revenue = Income which any business entity generates by selling their different goods in the market or by providing its services to its customers during the normal course of the company’s operations.
- Cost of Goods Sold = COGS is the sum of all direct costs related to the production of different types of goods sold by the company and includes the cost of the raw material, cost of the direct labor, and cost incurred on the other direct expenses.
Examples of Gross Earnings
To understand individual gross earnings, consider Mr. SURESH, who earned a total of 50,000/- for the recently completed fiscal year. He also paid 10,000/- in income tax, retirement contributions, and Social Security payments. In this case, his gross earnings are 50,000/-, and his net earnings are 40,000/-.
The Gross Earning is the income generated by the company after deducting the sum of the cost of the goods sold during a period from the total value of the revenue generated during the same period. It shows the performance of the company for the accounting year and the creditors, investors, and other stakeholders of the company to measure and make an analysis that how efficiently and effectively the company is capable of converting the sales into income. The gross earnings during an accounting period are reported on the statement of income of the company for that period.