Difference
between Gross profit and net profit
Gross profit and net profit are two different terms.
Difference between gross profit and net profit is being explained below;
1. Gross profit
Gross profit is calculated
by deducting direct expenses from the revenue. Direct expense is that expense
which is necessary to generate revenue. Typically direct expenses include
direct labor cost, direct material cost, and other direct expenses.
2. Net profit
Net profit is calculated by deducting the administrative,
selling and financial expenses from the gross profit, these expenses
collectively known as operating expenses. Operating expense does not directly
relates to
Example
of Gross profit & Net Profit
Sales
|
100,000
|
Cost of Sales
|
60,000
|
Gross Profit
|
40,000
|
Selling Expenses
|
(5,000)
|
Administration
Expenses
|
(10,000)
|
Financial Charges
|
(5,000)
|
Net Profit
|
20,000
|
