What is Gross vs Net?

Gross means the total or whole amount of before deductions. Net means what remains from the whole after certain deductions are made. For example, a company with revenues of 10 lakhs and expenses of 8 lakhs reports a total income of 10 lakhs and a net income of 2 lakhs.

In economics, “gross” means before deductions, Ex: Gross Domestic Product 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 GDP, minus depreciation on a country’s economic goods.

Examples of Net Items

  • Net Assets: Assirtained after certain liabilities are deducted.
  • Net Revenue: Revenue after refunds, returns, or other items are deducted.
  • Net Earnings: The bottom line that remains after deducting all expenses from revenues.
  • Net Margin: Net income divided by revenue, showing net income as a percentage.

Difference Between Gross and Net

Comparision Gross Net
Meaning The term refers to the total amount made as a result of some activity. It can refer to things such as total profit or total sales. It 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.
Profit Gross 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 a measure of the profitability of a venture after accounting for all costs. It is the actual profit and includes the operating expenses that are excluded from gross profit.
Weight In the context of weight, It refers to the weight of the product and the packaging. In the context of weight, net refers to the weight of the actual product.
Income Gross income is calculated by subtracting the cost of goods sold from revenue. Net income is calculated by subtracting expenses such as SG&A, interest payments, and taxes from gross income.

Gross vs Net

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