Gross profit
What is gross profit?
Gross profit is revenue less cost of sales.
Revenue is sales less sales returns.
It is the profit on trading, before the running expenses of the business.
Example
Revenue is £30,000.00 and cost of sales is £20,000.00. Gross profit is £10,000.00.
Why it matters
The other expenses are paid out of gross profit. If they come to more than the gross profit, the business makes a loss for the year.
Practise it
Practise it nowHow to work out gross profit and net profit
Ledger Drill is practice, not tax or accounting advice. If this looks wrong, tell us at [email protected].