Gross vs. Net

Gross
Net


Gross refers to the total and Net refers to the part of the total that really matters. For example, net income for a business is the profit after all expenses, overheads, taxes and interest payments are deducted from the gross income. Similarly, gross Weight refers to the total weight of the goods and the container and packaging. On the other hand, net weight refers to only the weight of the goods in question. For most food products, manufacturers print the net weight on the packaging for the benefit of consumers.

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Gross

Net

Meaning The term gross refers to the total amount made as a result of some activity. It can refer to things such as total profit or total sales. Net (or Nett) 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.
Taxation Salaried people now pay income-tax on their gross income as per Income-Tax Act of 1961. Businesses and self-employed persons pay tax on their net income as per Income-Tax Act of 1961.
Gross vs Net 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 (selling, general and administrative expenses), interest payments and taxes from gross income.
Gross vs Net Margin Gross margin = Gross income as a percentage of revenue Net margin = Net income as a percentage of revenue
Gross vs Net Weight In the context of weight, gross refers to the weight of the product and the packaging. In the context of weight, net refers to the weight of the actual product (without the packaging).

Gross vs. Net in Economics

In economics, gross means before deductions (brutto), e.g. Gross Domestic Product (GDP) 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 Gross Domestic Product (GDP) minus depreciation on a country's Capital (economics) goods. (The NDP is thus, in effect, an estimate of how much the country has to spend to maintain the current GDP.)

Gross vs. Net in Accounting

See Income vs Revenue

Gross vs Net Income

In accounting, for a P&L (Profit and Loss) statement, Gross profit, or Gross income, or Gross operating 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 equal to the gross profit minus overheads minus interest payable plus one off items for a given time period.

In relation to UK Value Added Tax (VAT, Sales Tax) the Net is the amount before tax, the gross is the amount including tax. Note that "net" may also be spelt "nett".

Gross Margin vs Net Margin

Gross margin is the ratio of gross profit to revenue. Net margin is the ratio of net profit to revenue.

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Comments: Gross vs Net

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Anonymous comments (12)

July 7, 2011, 3:28pm

That's right. It's simple algebra. Tax rate is 25%. Tax is applied to gross income and what's left after tax is net income. So net income is 75% (100% - 25%) of gross income. Let's say gross income is X. So Net income = 0.75 * X. We know that net income is $100. So 0.75 * X = 100. So X = 100 / (0.75)

— 24.✗.✗.203
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January 6, 2014, 2:46am

Thanks a lot

— 112.✗.✗.36
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July 7, 2011, 10:44am

Thanks for a very clear and informative article.

Just to expand on the below comments; it's simply a question of algebra, to decrease a value by 25% one could multiply the value by 0.75 (1 - 0.25), so to get back to the original, just divide by 0.75.

Took two years before that correction was made, hopefully no one used the first incorrect method...

— 85.✗.✗.70
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February 24, 2011, 12:43am

no you would divide by .75. Dont listen to the uneducated person below

— 208.✗.✗.3
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December 21, 2009, 7:32pm

Multiply 100 by .25, then add.

— 63.✗.✗.155
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November 3, 2009, 2:22pm

Ive got this question on a job quiz sheet i have to complete while it seems simple im not certain of the terms so im not sure wether im adding or subtracting 25%
1.If you are paid £100.00 net of tax, and the tax rate is 25%, what is your gross pay?
any help would be much appreciated thanks

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July 17, 2009, 7:26am

This was very helpful and informative! Much Appreciated!

— 76.✗.✗.226
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December 18, 2013, 11:59pm

Useful

— 174.✗.✗.11
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December 11, 2013, 4:08pm

That's neat!

— 204.✗.✗.10
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May 10, 2013, 7:40am

gross is overall figure but net is actual figure

— 112.✗.✗.116
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September 23, 2012, 4:15pm

actually, it's arithmetic not algebra, but let's not split hairs.

— 65.✗.✗.250
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October 28, 2011, 3:02pm

As a quick way to remember that Gross comes before Net..just remember 'G' comes before 'N'

— 70.✗.✗.51
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