Gross vs. net. When you take the first look at your paycheck, you might notice a big number and get very excited about it; however, when the time of the payment comes, you receive a much smaller amount of money than you expected. That doesn’t happen because the company is trying to fool you but because you probably got confused with the meaning of the words “gross” and “net”. Though they both can describe income, they mean two completely different things.
Gross vs. Net
- GROSS is used to describe the total amount of something.
- NET is used to describe the amount that is left after all the necessary deductions have been made.
- It shows their tax code number and details of their gross pay and tax deducted to date.
- Her net earnings last year were ￡15 000.
How to Use Net vs. Gross Correctly?
For instance, when you are talking about gross profit, you are talking about the difference between revenue and the cost of making the product. When you are subtracting interest payments, taxation, and selling, administrative, general, and all the other expenses, gross profit becomes net profit, and it obviously is lower. In other words, net profit is the amount of money that remains in the company after it has paid all of its expenses and there is no way that it will get any lower than it already is.
You might also encounter such phrases as “gross weight” and “net weight” but the difference between the two is the same. Just as it is in the case with profit or income, gross weight is the total weight and includes the packaging as well as the product. If you are talking about net weight, it is smaller because it only includes the weight of the product itself.
One other example of the use of gross vs. net is when you refer to the lease: the expenses that the tenant needs to pay. A gross lease is a type that requires the tenant to pay property taxes, maintenance insurance, and utility bills, in addition to the rent. A net lease, in contrast, is the one where the tenant only pays the rent.
Gross vs. Net Examples
- Investments showed a gross profit of 26%.
- The firm’s payroll has one field for gross pay and one for net pay.
- Within 10 years they had a gross profit margin of 50%.
- We tried to capitalize the customers’curiosity to increase our gross sales.
- These manufacturers have high gross margins.
- At the year end, net assets were ￡18 million.
- The group had a net profit margin of 30% last year.
- His net monthly salary is £1500.
- Its net profits plunged 73% last year.
- Net income plummeted to USD 3.7 million.
Net vs. Gross: What’s the Difference? | Image
Gross vs. Net | When to Use Net vs. Gross
Last Updated on March 13, 2021