What is Revenue at Gross or Net?

Revenue at Gross or Net

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Revenue at Gross or Net

The terms “gross revenue” and “net revenue” refer to the total income generated by a business before and after deductions, respectively. Here’s a closer look at each:

  • Gross Revenue (or Gross Sales):
    • This represents the total revenue from goods sold or services provided during a particular period without any deductions.
    • It does not account for any costs or expenses.
    • For instance, if a retailer sells 100 shirts at $20 each, the gross revenue would be $2,000.
  • Net Revenue:
    • This is the amount left after subtracting certain deductions from the gross revenue.
    • Common deductions might include returns, allowances, discounts, and any other amounts that are deducted from gross sales.
    • Continuing with the previous example, if the retailer had $200 in returns and $100 in discounts given, the net revenue would be: $2,000 (gross revenue) – $200 (returns) – $100 (discounts) = $1,700.

In general, when analyzing a company’s financial health or performance, both gross and net revenues can provide valuable insights. Gross revenue provides a snapshot of total sales, while net revenue offers a more realistic view of the money that actually comes into the business after accounting for deductions.

Example of Revenue at Gross or Net

Let’s use a simple example of a bookstore to illustrate the difference between gross revenue and net revenue.

Bookstore Example

Gross Revenue:

  • In the month of January, the bookstore sold 1,000 books.
  • Each book was priced at $10.
  • So, the gross revenue for January = 1,000 books x $10/book = $10,000.


  • 50 books were returned by customers, leading to a total return amount of $500 (50 books x $10/book).
  • The bookstore had a promotional discount of $1 off per book for 100 books. That’s a total discount amount of $100.
  • There were damaged books that couldn’t be sold amounting to $200.

Net Revenue:

To calculate the net revenue, we’ll subtract all the deductions from the gross revenue:

  • Gross revenue: $10,000
  • Minus returns: $500
  • Minus discounts: $100
  • Minus damages: $200
  • Net revenue = $10,000 – $500 – $100 – $200 = $9,200.

So, while the bookstore’s gross revenue for January was $10,000, its net revenue (after accounting for returns, discounts, and damages) was $9,200.

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