Difference Between Gross Sales and Net Sales

Gross Sales vs. Net Sales Infographics

Let’s see the top differences between gross and net sales and infographics.

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Key Differences

Below are some of the key differences:

  • Gross sales of the company are calculated without considering the returns, discounts, and the company’s allowances related to those sales. On the other hand, the net sale of the company is calculated after taking into consideration all these. I.e., returns by the customer during the period, the discount given to the customer against the sale of the product, and allowances related to the missing, damaged, or stolen product related to those sales.To know the company’s financial position at present and for the various decision-making processes, in most cases, management and the other company stakeholders consider net sales to be more relevant when compared to the gross sales. The net sales tell about the net salesNet SalesNet sales is the revenue earned by a company from the sale of its goods or services, and it is calculated by deducting returns, allowances, and other discounts from the company’s gross sales.read more the company has made after considering the deductions.The value of the gross sales will always be higher or equal when compared with the company’s net sales during the same period because it is calculated after subtracting the returns, discounts, and allowances from the gross sales.For the calculation of the gross sales, the number of units sold during the period is multiplied by the selling price per unit. On the other side, the company’s net sales are calculated by subtracting the value of returns, discounts, and the allowances of the period from the value of the gross sales of that period.Net sales depend on the gross sales as the net sales figure is derived after adjusting the value of returns, discounts, and the allowances of the period from the value of the gross sales. On the other side, gross sales are a value derived when the number of units sold during the period is multiplied by the price at which the units are sold, which is not dependent on the net sales value.The value of the company’s total net sales during the period is reported in the statement of income of that period. In contrast, on the other side, the value of gross sales is not reported anywhere in any of the company’s financial statementCompany’s Financial StatementFinancial statements are written reports prepared by a company’s management to present the company’s financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more. One has to go through the financial statement notes in detail in the section, which contains details about the net sales activities of the company, to find out the figure for the gross salesGross SalesGross Sales, also called Top-Line Sales of a Company, refers to the total sales amount earned over a given period, excluding returns, allowances, rebates, & any other discount. read more during the period.For example, during the financial year, the company sells 1000,000 units of the product, each3 at $ 10. Out of these goods of value, $ 150,000 were damaged, the company’s customers returned goods worth $ 500,000, and $ 350,000 was given as a discount to the customer. In this case, the value of the gross sales will be calculated by multiplying the number of units sold during the period by the price at which the units are sold, i.e., $ 1000,000 * 10, which comes to $ 10,000,000.On the other hand, net sales will be calculated by subtracting returns made by the customer during the period, the discount is given to the customer against the sale of the product, and the allowances related to the missing, damaged, or the stolen product of the company related to those sales from the value of the gross sales, i.e., $ 10,000,000 – $ 150,000 – $ 500,000 – $ 350,000 which comes to $ 9,000,000

Gross Sales vs. Net Sales Comparative Table

Conclusion

The company’s gross sales are calculated by multiplying the number of units sold during the period by the selling price per unit. Returns made by the customer during the period, the discount is given to the customer against the sale of the product, and the allowances related to the missing, damaged, or the stolen product of the company related to those sales are not considered while calculating the gross sales.

On the other hand, net sales are dependent on gross sales figures. Therefore, it is calculated by subtracting the customer returns during the period, discount given against the product’s sale, and allowances related to the missing, damaged, or stolen product related to those sales from the gross sales value.

This article has been a guide to Gross Sales vs. Net Sales. Here we discuss the top 6 differences between gross and net sales along with infographics and a comparison table. You may also have a look at the following accounting articles –

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