Net vs Gross
*Gross – total earnings in a specific period
*Net – what you take home
You would often hear the two words net and gross, especially when you are about to take up any career after finishing your education. You would hear the two words if you are an employer too and provide employment opportunities to people that apply for jobs in your concern or firm.
In short it can be said that these two terms are often used in business sector. Although the two terms, namely, net and gross are used quite often, we tend to misunderstand the concept behind these two terms.
You would represent the earnings you have made in a specific period of time, say a month, with the term ‘gross’. If you are a salaried employee then the term gross would include the total salary paid to you in the specific period of time. If you run a business, then gross would simply mean the total amount that you might have earned through the sales of products in a particular period of time. The number of units of products should be multiplied by the price of the product and it gives the gross made in the particular period of time.
The concept of ‘net’ is simple in the sense that it is the total earnings you have made in a specific period of time minus the expenses incurred. The expenses can be of different forms such as taxes that are deducted at source, health insurance, social security fund, festival advance installments and the like. Hence it is to be understood that these expenses are not operating expenses. You would incur operating expenses only if you are a business owner. The operating expenses include salaries to your employees, electricity charges, legal expenses, advertisement charges and the like.
Recap:
The difference between net and gross:
- Gross represents the total earnings you have made in a specific period of time. Net represents the total earnings you have made in a specific period of time minus forms of expenses.