In accounting, Gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting overhead, payroll, taxation, and interest payments. Note that this is different than operating profit.

Net sales are calculated:

Net sales = Sales – Sales returns and allowances

Gross profit is found by deducting the cost of goods sold:

Gross profit = Net sales – Cost of goods sold

Gross profit should not be confused with net income:

Net income = Gross profit – Total operating expenses

Cost of goods sold is calculated differently for merchandising business than for a manufacturer.

See also

• Profit, for a more general discussion, including operating profit
• EBITDA
• Profit margin, the ratio of net income to net sales
• Income statement, overview of related concepts