What is the difference between gross receipts, gross revenues, and gross profit?
Answer:
Gross receipts: The total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses.
Example of Gross Receipts- If you operate a nonprofit organization, you must report gross receipts as your total income, rather than gross sales, as your income is most likely not sales-driven. For-profit businesses generally have sales income, which includes sales of services as well as goods. If your business has no other income type, your total gross sales may equal your total gross receipts. Some states impose a tax based on gross receipts, regardless of the type of business. There are also states such as Virginia, West Virginia, Pennsylvania and South Carolina that allow local taxes to be based on gross receipts.
Gross revenues: Gross revenue is the total amount of sales recognized for a reporting period, prior to any deductions. This figure indicates the ability of a business to sell goods and services, but not its ability to generate a profit. Deductions from gross revenue include sales discounts and sales returns. When these deductions are netted against gross revenue, the aggregate amount is referred to as net revenue or net sales.
The use of gross revenue as a metric has somewhat more validity in a services organization, since there are no sales returns that might otherwise create a substantial difference between gross sales and net sales.
Gross profit: Profit is the amount of money your business gains. The difference between gross profit and net profit is when you subtract expenses.
Gross profit is your business’s revenue minus the cost of goods sold. Your cost of goods sold (COGS) is how much money you spend directly making your products. But, your business’s other expenses are not included in your COGS. Gross profit is your company’s profit before subtracting expenses.
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