Definition: Gross Income
Definition of Gross Income
What is Gross Income?
Gross Income is the total amount of a business's income and earnings before subtracting any costs. Costs are subtracted from Gross Income to calculate gross profit and net profit. The term "gross" means large amount, the term "net" means smaller amount, and the term "revenue" means incoming gains, as in gains in cash from sales or interest earned from bank accounts.
For example, if a business had a total gross income of $100,000 and it spent $60,000 to obtain its income, its Gross Income would equal $100,000 and its net profit would be $40,000.
Net Profit = Gross Income - Gross Expenses
Net Profit = $100,000 - $60,000
Net Profit = $40,000
Gross Income can be calculated at various stages. For example, a business can calculate its gross Income on shoe sales separate from coat sales. Since this is the case, gross income needs to be carefully defined so that it is not misinterpreted, as in total gross income from all income sources verses total gross income from shoe sales.
For example, if a business had a total gross income of $100,000 and it spent $60,000 to obtain its income, its Gross Income would equal $100,000 and its net profit would be $40,000.
Net Profit = Gross Income - Gross Expenses
Net Profit = $100,000 - $60,000
Net Profit = $40,000
Gross Income can be calculated at various stages. For example, a business can calculate its gross Income on shoe sales separate from coat sales. Since this is the case, gross income needs to be carefully defined so that it is not misinterpreted, as in total gross income from all income sources verses total gross income from shoe sales.
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