Whether you’re a business owner or a full-time employee, there are lots of figures you’ll need to become familiar with to help you understand your tax forms, as well as your profits or salary. Two such figures are gross income and net income, closely related but different figures. Each can tell you different things about how a business operates, and can tell different stories about the success of that business.
What are gross and net income, what is the difference between them, and why should you care?
What Is Gross Income?
Gross income is the total amount of income earned over a period of time (often a fiscal quarter or a year). It is, essentially, how much the company makes on a product minus expenses directly related to creating the product. Other additional expenses are included in the figure (gross doesn’t deduct those additional expenses, only COGS).