Gross profit and net profit both show the performance of company's business . Both are needed to make for evaluating business performance . But there are many difference between gross profit and net profit . To know difference is also important from calculating point of view . Following are main differences between gross profit and net profit .

• Gross profit is excess of sale over cost of goods sold . But net profit is excess of gross profit over indirect expenses.
• Company always calculates his selling price on basis gross profit on sale . Suppose A Co. wants to sell its product . But before selling it to customers A Co. must decide his product's selling price . After doing market survey , company finds that other concern of same product are earning 20% gross profit or gross margin on sale . So, A Co. can also decide 15 % to 20 % adding gross profit of sale in total cost . So , gross profit is important to calculate from price determining point of view . But net profit is calculated for watching the trend of business result .
• Normally , Company can calculate gross profit by making trading accounting of business . But net profit is ascertained only after making profit and loss account .
• Know difference with Practical Example :-

Suppose in the end of a company shows following items

Opening stock = Rs. 10000

Purchase = Rs. 4000

Wages and carriage = Rs. 3000

Closing stock =Rs. 7000

Sale = Rs. 20000

Office and administrative expenses = Rs. 6000

Calculation of gross and net profit on the basis of formula and by making
trading and profit and loss account

Cost of goods sold

= Opening stock + Purchase + Direct expenses - Closing stock

= 10000+4000+3000-7000

=10000

Gross profit = Sale - Cost of goods sold

= 20000-10000

= Rs. 10000

Net profit

= Gross profit - Indirect Expenses

= 10000 - 6000 = Rs. 4000

Trading and profit and loss account for the year ended

.

## \$type=three\$a=hide\$cm=hide\$s=hide\$show=/2019/06/10-steps-to-become-better-investor.html\$l=hide

Name

access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation Diwali Messages documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps Google Adsense google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting Intangible interest international Internet Introduction of Tally 9 inventory investment investment in Shares invoice IT Japan Job costing journal entries Journal Entries eBook Help Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting Online Accounting Course otcei pakistan parents pay pal pdf Personal Finance pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance truthfulness tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
false
ltr
item
Accounting Education: What is difference between gross profit and net profit ?
What is difference between gross profit and net profit ?
http://svtuition.googlepages.com/profitandlossaccount.PNG
Accounting Education
http://www.svtuition.org/2009/08/what-is-difference-between-gross-profit.html
http://www.svtuition.org/
http://www.svtuition.org/
http://www.svtuition.org/2009/08/what-is-difference-between-gross-profit.html
true
2410664366776677676
UTF-8