Gross versus net profit

Businesses must calculate and list their gross income and net income on their federal return.

Gross revenue - amount that a business earns from the sale of goods/service before administrative cost, tax and all other expense have been deducted.

Sales = gross revenue

Gross profit - or gross income.

Gross revenue minus cost of goods sold equals gross income.

Sale-cost of goods= gross income

Net profit - after all expenses have been deducted from sales.

Sales-cost of goods-expense= net income.

If appropriate records are kept many businesses expense can be deducted from business gross income.