The Difference Between Gross and Net Revenue

The Difference Between Gross and Net Revenue

Gross revenue, also known as gross sales, represents the total income a company earns from sales of its products or services before any expenses are deducted. It provides a broad view of the company’s incoming funds without considering costs yet.

How to calculate gross revenue

Gross Revenue = Sales Revenue (Price × Quantity Sold) + Other Revenue Streams

For instance, if Johnny’s bakery sells 1,000 cakes at $20 each, the gross revenue would be $20,000. This figure reflects all sales transactions before any deductions are made.

Net revenue, sometimes referred to as net sales, is the amount of money a company earns after subtracting returns, allowances, and discounts from the gross revenue. It represents the revenue left after accounting for the cost of doing business.

How to calculate net revenue

Net Revenue=Gross Revenue−Cost of Goods Sold (COGS)

For Johnny’s bakery, if returns amount to $2,000, discounts total $1,000, and allowances are $500, subtracting these from the gross revenue of $20,000 gives a net revenue of $16,500.

Gross revenue is the total sales figure before any deductions and serves as the top line of the income statement. Net revenue, on the other hand, reflects the actual earnings after all deductions, representing what the company takes home.

And that’s it! This overview should provide a solid understanding of the difference between gross revenue and net revenue, highlighting their distinct roles in financial analysis.

Related Videos

  • What the heck are chargebacks

    Chargebacks - What are they?

  • Cloud-Based Virtual Terminal

    EBizCharge Cloud-Based Virtual Terminal

  • What is tokenization

    What Is Tokenization (And Why You Need It)

  • How to Calculate Gross Revenue for your Business

    How to Calculate Gross Revenue for your Business

  • What is Net Revenue and How do you Calculate it?

    What is Net Revenue and How do you Calculate it?

  • Difference between Gross and Net Revenue

    The Difference Between Gross and Net Revenue

  • What is Tokenization

    What is Tokenization?

  • How do Credit Card Payments Work

    How Do Credit Card Payments Work?

  • What is an invoice?

    What is an Invoice?

  • Email Invoice Payment Links for Quickbooks

    Email Invoice Payment Links from QuickBooks

  • Recurring Billing for Quickbooks

    Recurring Billing for QuickBooks

  • How to Calculate Liabilities

    How to Calculate Liabilities

Credit Card Processing Blog

Articles, guides, and more to help your business grow.

Articles, guides, and more to help your business grow.

Read Our Blog

Learning Center

Insightful information on aspects of the payment industry,

Insightful information on aspects of the payment industry,

Explore our Knowledge Base