Gross profit
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| Accountancy | |
|---|---|
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| Key concepts | |
| Accountant · Bookkeeping · Trial balance · General ledger · Debits and credits · Cost of goods sold · Double-entry system · Standard practices · Cash and accrual basis · GAAP / IFRS | |
| Financial statements | |
| Balance sheet · Income statement · Cash flow statement · Equity · Retained earnings | |
| Auditing | |
| Financial audit · GAAS · Internal audit · Sarbanes-Oxley Act · Big Four auditors | |
| Fields of accounting | |
| Cost · Financial · Forensic · Fund · Management · Tax | |
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 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.
Cost of goods sold is calculated differently for merchandising business than for a manufacturer.
[edit] See also
- EBITDA
- Profit margin, the ratio of net income to net sales
