Gross profit

Accountancy
Key concepts
Accountant · Accounting period · Bookkeeping · Cash and accrual basis · Cash flow forecasting · Chart of accounts · Journal · Special journals · Constant item purchasing power accounting · Cost of goods sold · Credit terms · Debits and credits · Double-entry system · Mark-to-market accounting · FIFO and LIFO · GAAP / IFRS · General ledger · Goodwill · Historical cost · Matching principle · Revenue recognition · Trial balance
Fields of accounting
Cost · Financial · Forensic · Fund · Management · Tax (U.S.)
Financial statements
Balance sheet · Cash flow statement · Statement of retained earnings · Income statement · Notes · Management discussion and analysis · XBRL
Auditing
Auditor's report · Financial audit · GAAS / ISA · Internal audit · Sarbanes–Oxley Act
Accounting qualifications
CA · CPA · CCA · CGA · CMA · CAT · CFA · CIIA · IIA · CTP

In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting overhead, payroll, taxation, and interest payments. Note that this is different from operating profit (earnings before interest and taxes).

Net sales are calculated:

Net sales = Gross sales – Sales of returns and allowances.

Gross profit is found by deducting the cost of goods sold:

Gross profit = Net sales - Cost of goods sold.

Gross profit should not be confused with net income:

Net income = Gross profit – Total operating expenses – taxes – interest.

Cost of goods sold is calculated differently for merchandising business than for a manufacturer.

Operating Profit = Gross Profit - Total operating expenses

See also

• Cost of goods sold
• EBITDA
• Profit margin (the ratio of net income to net sales)
• Gross margin (the difference between the sales and the production costs)
• SG&A
• Net income
• Income statement