• Home
  • Finance
    • Financial Management
    • Strategic Management
    • Investment Analysis and Portfolio Management
    • Project Management
    • Islamic Banking & Finance
    • Auditing
  • Marketing
    • Principle of Marketing
    • Marketing Management
    • International Marketing
    • Advertising & Promotion
    • Commercial Challenges
  • HRM
    • Human Resource Management
    • Principles of Management
    • Training & Development
    • Employee Performance Management
  • Others
    • Introduction to Business
    • Business Communication
    • Banking & Finance
    • Entrepreneurship
    • Economics
  • Personal Skills
  • Tips & Tricks
  • About Us
    • Contact US

Business Study Notes

B.Com, M.Com. BBA & MBA Exam Study Online

  • Home
  • Finance
    • Financial Management
    • Strategic Management
    • Investment Analysis and Portfolio Management
    • Project Management
    • Islamic Banking & Finance
    • Auditing
  • Marketing
    • Principle of Marketing
    • Marketing Management
    • International Marketing
    • Advertising & Promotion
    • Commercial Challenges
  • HRM
    • Human Resource Management
    • Principles of Management
    • Training & Development
    • Employee Performance Management
  • Others
    • Introduction to Business
    • Business Communication
    • Banking & Finance
    • Entrepreneurship
    • Economics
  • Personal Skills
  • Tips & Tricks
  • About Us
    • Contact US
Home » Difference between Gross and Net Amount

Difference between Gross and Net Amount

By Richard Daniels Reading Time: 3 mins
Updated February 8, 2017

Difference between Gross and Net Amount:- It is very common to hear the terms of gross and net , both when it comes to wages, as when we look at the income statement a company or when we say a macroeconomic data. The gross and net measure the same magnitude , but they are different concepts and must know how to distinguish them so that there is no confusion. The two concepts are quantitative expressions used for the calculation of economic magnitudes.

Difference between Gross and Net Amount 

The difference between gross and net that should be clear is that a net amount is the final amount left after making any changes to the gross amount, in most cases after conducting some type of discount (which are generally imposed ):

Net = Gross – Discount

Independently we could define gross as the amount total result of some activity, such as gross wages, gross sales or gross domestic product . The net instead is the final amount remaining as a result of having applied a discount to something rough, the above examples we would net salary, net sales and net domestic product. Let’s look at the most common cases where gross and net expressions are used.

Gross Salary and Net Salary

To understand the structure of a payroll is essential to know the difference between the concepts of gross salary and net salary. Especially when negotiating our wages and calculate how much money we will collect at the end of the month.

Net or net wage is the monetary amount received by the worker , i.e, the money you receive in your account after deducting taxes and contributions to Social Security . The gross salary in exchange, is the total amount before these with holdings are applied.

Net Salary = Gross Salary – Taxes – Social Security

In a Company’s Income Statement

When we analyze the income statement of a company we also find gross and net terms.

An example is the gross profit and net profit . Gross profit is simply the result of subtracting total sales the cost of those sales, while net profit plus cost of sales also are subtracted taxes, interest, depreciation and overhead costs business. Therefore the relationship between gross profit and profit net is as follows:

Net profit = Gross profit – taxes – interest – depreciation – overheads

In the case of gross margin and net margin is exactly the same, since the gross margin is gross profit divided by sales and net margin is net profit divided by sales also. The net margin will be equal to the gross margin discounting the taxes, interest, depreciation and general expenses of the company. The margin is used to determine the percentage of benefit we have of each product or service that we sold.

Another example would be the net sales , which are the result of subtracting refunds, bonuses, rebates and discounts to gross sales.

Macroeconomic Data

In macroeconomics these expressions are also used and as in the previous cases, the net value is equal to the gross value minus a discount . For example, the difference between the net domestic product (NDP) and the gross domestic product (GDP) is that the PIN is equal to GDP less the costs of raw materials, services and depreciation.

PIN = GDP – cost raw materials – cost services – depreciation

Weight

These terms are also used in product weight. The gross weight is generally equal to the net weight of the product plus the weight of the packaging.

Gross Weight = Net Weight + Container

Exceptional Cases

As we have seen, the net is always the basis of what we are measuring , the heart of the product. The gross is simply the result of adding taxes to that base. According to the Royal Spanish Academy (RAE), in a quantity of money, the gross is that which has not experienced any withholding or discount. However, there is an exceptional case, as in the case of prices to the consumer .

Net and Gross Price

In the case of prices, the net value is greater than the gross value. Since the price net is paid by the final consumer price including taxes. For example, when an entrepreneur sets the price of a product, it sets the price at which to sell to cover their costs and have some benefit, at this price is known as gross price. After added taxes ( VAT in this case), giving final value of the net price.

Author at Business Study Notes
Richard DanielsAuthor at Business Study Notes

Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
Love my efforts? Don't forget to share this blog.

Related Posts:

  • Communication Strategies Definition | Types of Communication…
    Communication Strategies Definition | Types of Communication Strategies
  • What is the Process of Motivation? Explain in detail
    What is the Process of Motivation? Explain in detail
  • Process of MBO (Management by Objectives) - Explained with…
    Process of MBO (Management by Objectives) - Explained with Examples
  • Statement of Work Definition and Guidelines to Prepare
    Statement of Work Definition and Guidelines to Prepare
  • Risk Management: Definition, Types, Model, Process,…
    Risk Management: Definition, Types, Model, Process, Strategies, Practices

Filed Under: Economics

Related Posts

System-Views-of-Management-image

System Views of Management

System Views System views of management associates with the Management division of the organization and it assumes that all of the organizations are … [Read More...]

Leadership Theories

Situational Leadership Theories

Situational Leadership Theories Situational model of leadership is a factor that emphasizes the behavior of the leaders regarding different situations. … [Read More...]

Behavioral Leadership Model

Behavioral Leadership Model

Leadership  Leadership is the most critical and complex responsibility across any organization. It is because the leadership requires to be realistic, … [Read More...]

career development process in hrm

Career Development Process

Career Development Process Today's career development process has become a threat for students, especially a question that may stun many students who have … [Read More...]

Strategic leadership

Strategic Leadership Model

Strategic Leadership Model The strategic leadership model is basically the study of the leadership style. It describes the ways of modernizing an … [Read More...]

Types of Managerial Decision Making

Types of Managerial Decision Making

Managerial Decision Making Decision Making is an art of selection of one feasible alternative decision from many. Therefore types of managerial decision … [Read More...]

Quantitative-management-approach

Quantitative Management Approach

Quantitative Management Approach The quantitative management approach is used to enhance decision making power by using quantitative tools. As well as … [Read More...]

Effective-business-messages-image

Effective Business Messages

Effective Business Messages The process through which business messages are effectively prepared that have the potential to create desired results from … [Read More...]

Search the Site

ADVERTISEMENT

Business Study Notes

Business Study Notes is all about business studies or business education. Visit us to find here free business notes of all the subjects of B.com, M.com, BBA & MBA online.

Disclaimer

All the images and videos present on the Business Study Notes are not owned by us, if you found anything under copyrights, please Contact Us, we will remove it ASAP.

Categories

© Copyright 2023 Business Study Notes. All rights reserved. Privacy Policy, Sitemap.  
DMCA
PROTECTED