The terms gross and net can often confuse people who are unfamiliar with finance or mathematical terms. However, most people come across these terms throughout their daily lives. They may see them in job descriptions talking about salary or they may hear the terms on a television business report. Most often these words are used in reference to their salary or wages. Once explained, net and gross are often applicable to many situations.
With regard to income, the gross total includes everything you have earned. It is your total salary. For example, if you are paid $50,000 per annum that is your gross salary. If you have other sources of income, such as rental income of $10,000 per annum this is combined with your salary as your gross earnings. So your gross income is everything you receive before any deductions are made, such as taxes or expenses involved in the maintenance of a rental property.
Typical salaries, wages and other revenues have all manner of deductions from them for payment. The most obvious example is income tax. In a simple example, if the only deduction you have from your $50,000 salary is 20 percent income tax then what remains after this deduction is your net salary or income. In this example, your net salary is $40,000 because that is the actual amount deposited into your bank each year.
Companies operate in a similar fashion in that they receive revenues from what might be many different sources. Every single piece of revenue received in year -- from sales, rentals, commissions or investments -- is the individual company’s gross revenue, or gross income. However this is different from what the company made, or it's profit. The net income is what remains after salaries are paid, rentals on the offices are paid, utility bills are paid, and other expenses such as office equipment, petroleum and taxes are paid. In some cases the expenses exceed the gross income, resulting in the company making a net loss.
Other common places where you may encounter the terms are in the movie and the transport industry. In the movie industry a film is said to have grossed a certain amount of money. This is the income a film received from the face value of every ticket sold. However, a film may have a sensationally high gross but fail to make money, as all the expenses involved with production, distribution and marketing are deducted. In the transport industry a 2-ton truck with a 1 ton load may be described as having a gross weight of 3 tons.
Kate Coen has been writing professionally since 1996. She has written for "The Guardian," "Time" magazine, "SIX Magazine," Reuters, Bloomberg and other media. Coen holds a Bachelor of Arts in modern languages (French and Spanish) from Oxford University.