Gross profit:
Gross profit is the amount of profit which the company earns before subtracting the expenses. In accounting terms, it is calculated as:
Gross profit = Net sales – Cost of goods sold
Net Profit:
Net profit is the actual profit which is remained after deducting all the expenses including taxes. In accounting terms, it is calculated as:
Net profit = Total Revenue – Total Expenses
Differences:
| Basis | Gross profit | Net profit |
|---|---|---|
| Definition (www.dictionary.reference.com) |
Gross receipts less the cost of goods or production but before the deduction of such other costs as rents or salaries. | The actual profit made on a business transaction, sale, etc. or during a specific period or business activity, after deducting all costs from gross receipts. |
| Synonyms | Margin, spread, profit, increase | Proceeds, return, gains, income and makings |
| Antonyms | Loss | |
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| Word origin | The word net profit was originated in 1660-1670. | |
| Calculated as | Gross profit = Net sales – Cost of goods sold | Net profit = Total revenue – Total expenses |
| Advantages/Benefits | Its advantages are:
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Its advantages are:
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| Disadvantages | Its disadvantages are:
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