Gross profit

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Accountancy
Key concepts
Accountant Accounting period Accrual Bookkeeping Cash and accrual basis Cash flow forecasting Chart of accounts Convergence Journal Special journals Capital Maintenance in Units of Constant Purchasing Power Cost of goods sold Credit terms Debits and credits Double-entry system Mark-to-market accounting FIFO and LIFO GAAP / IFRS Management Accounting Principles General ledger Goodwill Historical cost Matching principle Revenue recognition Trial balance
Fields of accounting
Cost Financial Forensic Fund Management Tax (U.S.)
Financial statements
Balance sheet Cash flow statement Income statement Statement of retained earnings Notes Management discussion and analysis XBRL
Auditing
Auditor's report Control self-assessment Financial audit GAAS / ISA Internal audit Sarbanes–Oxley Act
Accounting qualifications
CIA CA AIA CPA CCA CGA CMA CAT AAT CFE CICA ACCA CIMA CGMA
v t e

In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting overhead, payroll, taxation, and interest payments. Note that this is different from operating profit (earnings before interest and taxes).

The various deductions (and their corresponding metrics) leading from Net sales to Net income are as follow:

Net sales = Gross sales - (Customer Discounts, Returns, Allowances)

Gross profit = Net sales - Cost of goods sold

Operating Profit = Gross Profit - Total operating expenses

Net income (or Net profit) = Operating Profit – taxes – interest

(Note: cost of goods sold is calculated differently for a merchandising business than for a manufacturer.)

See also [edit]