What is the Difference Between Gross and Net?

by admin on June 26, 2008

Gross refers to a sum of money given to another person; typically as payment for labor, without any taxes or other deductions taken away. For example, if you earn a salary of $40,000 per year, this amount is your gross earnings, but because we live in a community, we give some of our wages to help pay for the infrastructure of the community we live in. Without taxes, we wouldn’t have roads to drive to work on. If we don’t pay a small amount to ensure that we still receive some money in the event that we are unemployed, then we have no protection in times of crisis. The amount of money that we actually receive on our pay checks after taxes, unemployment and other deductions have been made represents our net earnings; the amount of money that we actually get to keep.

In terms of a corporation, gross earnings refer to the total amount of money that has come into the business over a defined period of time. Net earnings are the actual profit made once all expenses have been paid such as labor, cost of goods sold, overhead like rent and utilities and other expenses.

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