To those of us who work for a living, perhaps the term net and gross don’t seem that important, but net and gross affect us all. Yes, business owners are fixated on their bottom line and they will often toss around terms like net and gross profits, but what is the difference between the two? There is a huge different. In fact, the bottom line would actually mean the net profit, or what you take home after costs, and not the gross. So let us take a look at the differences between net and gross, so when anyone throws around the terms you will know exactly what they mean.
Gross
Gross is the total sum of whatever you are talking about. Usually the term gross is used to describe profit, therefore gross profit would be all sales, or all money made before costs and taxes. It would include every dollar and cent taken in from any endeavor. In regards to weight, it would be the gross amount in weight of the entire sum of whatever is being weighed.
Examples of Gross
1. You make $300 per week; your taxes are $45 so you take home $255 each week.
Your gross pay = $300 each week
2. A company makes $100 million dollars a year. After costs, labor, taxes and expenses their annual profit is about $30 million dollars a year. Their gross revenue is $100 million a year.
3. You buy a present that weighs 22 pounds. You have to mail the present to a friend, and the packaging weighs .5 pounds. The gross weight is 22.5 pounds.
Net
Net, unlike gross, eliminates all costs in regards to profit, all taxes, and penny that is deducted, and in weight it refers only to the base object being weighed. It is your take home pay, not what you make an hour or a week. Using the same 3 examples above, let’s see what the net would be.
1. You make $300 per week; your taxes are $45 so you take home $255 each week.
Your net pay = $255 each week
2. A company makes $100 million dollars a year. After costs, labor, taxes and expenses their annual profit is about $30 million dollars a year. Their net profit is $30 million a year.
3. You buy a present that weighs 22 pounds. You have to mail the present to a friend, and the packaging weighs .5 pounds. The net weight is 22 pounds.