Difference between gross and net profit

Gross profit vs net profit (comparison)

Gross profit shows how much money your business makes after meeting some costs. Net profit shows how much you make after meeting all costs.

A business’s gross profit is the money it has left after paying for the goods and services it sold. Its net profit is the money left after paying absolutely all expenses and taxes.

Gross profit versus net profit illustration. Gross profit is revenue minus the cost of goods or services sold. Net profit is

The difference between gross profit and net profit is operating expenses and taxes

Gross profit

  • Is money you make on sales
  • Creates a pool of cash for running the business
  • Does not guarantee a net profit

Net profit

  • Is surplus cash (money made) after all expenses have been paid
  • Can be distributed to owners or reinvested into the business

See related terms

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This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.