Difference between Gross Profit and Net Profit.

Gross Profit Vs. Net Profit

Gross Profit is the profit that a company makes after deducting the cost of goods sold (COGS) from its revenue. COGS includes the direct costs of producing or acquiring the goods that a company sells, such as raw materials, labor costs, and manufacturing overheads. Gross Profit is calculated by subtracting COGS from the revenue

Gross Profit = Sale-COGS

Net Profit is the profit that a company makes after deducting all of its expenses, including COGS, operating expenses, interest, taxes, and other charges. Net Profit is calculated by subtracting total expenses from the total revenue.

Net Profit = Sale-Total Expenses –Income Tax

Example :

Sale  =100

COGS = 50

Other Expenses = 30

Income Tax = 10

Gross Profit = Sale-COGS

Gross Profit = 100-50 = 50

Net Profit = Sale-Total Expenses-Income Tax

Net Profit = 100-50-30-10 = 10