Gross vs. Net

Difference Between Gross and Net

*Gross – Earnings on a whole in a specific period

*Net – earnings that you take homes

You would often hear net and gross, especially when you are on the point of taking any career after completing your education. You would hear both words if you are an employer also and provide opportunities for job to the people who apply for it.

These two terms are often used in the field of business. Although both terms are used often, we tend to make mistake in understanding them.

You would represent your earnings which you have made for a specific period, let us say a month, with ‘gross’. If you are an employee then gross would include the complete wages paid to you for the specific period. If you are a trader then gross for you would mean simply the total amount of money which you have earned by sales of products for the particular period. The number of units of products should be multiplied by the price of the product and it gives the gross income made for the particular period.

Concept ‘ of net ‘ is simple in sense that it is complete money earned by you in a specific period after deducting the expenses incurred in that period. Expenses can be in different forms like the taxes which are deducted at the source, the health insurance, the fund of social security benefits, advance payments for festivals and many other similar expenses. It must be understood that these expenses are not operating expenses. You would incur operating expenses only if you are an owner of business. Operating expenses include wages to your employees, expenses of electricity, legal expenses, and expenses on advertising and other expenses of similar type

Summary:

* Gross is represents total earnings which you have made in the specific period. The net represents complete income which you have made for the specific period after deducting all forms of expenses.

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