no comments

5 Differences Between Gross and Net – Comparison Table

When in business you will hear the terms gross and net used often. These two terms are related, but they are not the same thing. Gross is the whole of something whereas net is a part of the whole after some kind of deduction.

 

What is the Gross?

It is the total amount made such as total profit or total sales. This is without any deductions being made. People who are on salary pay income tax on their gross income. This is because of the Income Tax Act of 1961.

 

What is the Net?

It is the amount that is left after all deductions have been made. It starts with the gross and then subtracts all deductions such as production cost and advertising. Self-employed people and businesses pay taxes based on their net income. This is also because of the Income Tax Act of 1961.

gross income vs net income

 

Calculating Gross and Net Income

Gross income = cost of goods sold – revenue

Net income = (expenses + interest payments + taxes) – gross income

 

Watch the below video explaining the differences between gross income and net income:

 

Gross and Net Margins

  • Gross margin is the gross income presented as a percentage of the revenue.
  • Net margin is the net income presented as a percentage of the revenue.

 

Gross Weight and Net Weight

  • Gross weight is the actual weight of the product plus the weight of the packaging.
  • Net weight is actual weight of the product without any of the packaging.

 

Gross Vs. Net Differences

Here is a simple comparison table depicting the key differences between gross and net.

Gross

Net

  • Total amount made without deductions.
  • Amount left over after deductions.
  • Salaried people pay taxes based on their net income.
  • Self-employed people and businesses pay taxes based on their net income.
  • Gross income = cost of goods sold – revenue.
  • Net income = (expenses + interest payments + taxes) – gross income.
  • Gross weight is the actual weight plus packaging.
  • Net weight is the actual weight without packaging.

Reply