Gross profit

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In accounting, Gross profit or sales profit or gross operating 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.

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.

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