When it comes to best Spoken English classes, Sahasriya leads the way with over 2500 successful students in IELTS & PTE coaching. In Bengaluru or Chennai-Velachery and Porur or Coimbatore, the best success rate destination always ends up at Sahasriya. Thats why Sahasriya provides value to students through its Interesting English series too. Everyday’s note on important aspects of English language is a standing example of narrating experiences of Spoken English classes inputs from Sahasriya. Today, it is about ‘Gross’ and ‘Net’.
The first time you looked at a salary slip, you may have seen a large number and been very happy, only to have your excitement dimmed when you checked that a much smaller amount was credited.
That is because gross pay and net pay refer to two different accounting concepts. They each describe income, but only one takes operating costs and other expenses into account.
You might be asking yourself why accountants need two different ways to describe income in the first place. Even though you might only care about the amount of money you actually take home, federal and state governments (and creditors and bankers) are usually more concerned with the amount of money your company actually pays you.
If you aren’t sure whether the number you are looking at represents net or gross pay, continue reading to learn more.
When to Use Gross
What does gross income mean? Gross has several meanings, but, in this article, we focus on its use as an adjective that describes the sum total of something before expenses.
You will often see a line marked gross earnings on your salary slip or on a company’s quarterly financial statement.
In these instances, gross denotes all of your (or the company’s) income before deducting operating costs, taxes, or other expenses.
- My gross pay this period was embarrassingly low, but I will be taxed on it anyway.
- Many oil companies have reported lower than average gross income during the crude surplus.
When to Use Net
What does income mean? Like gross income, net income can mean several things. The relevant usage for this article is the actual total of something, after all expenses, taxes, and other deductions have been taken into account.
On a salary slip, the net income should always be lower than the gross income.
Here are a few sentences that demonstrate what I mean,
- Even though my gross pay was Rs. 26,000 this period, my net pay was only Rs. 21,120 after taxes
- Net earnings this quarter were Rs 1.10 per share, up from Rs 0.96 per share a year ago
Trick to Remember the Difference
Both gross and net refer to the income of an individual or a company, but each term refers to income at a different point of accounting analysis.
- Gross describes the total before expenses, taxes, and deductions.
- Net describes the total after all expenses, taxes, and deductions have been taken into account.
On a salary slip, the net pay will be your “take home” pay.
Since net and take home both contain the letter T, you can use this phrase to remember the meaning of the word net in financial contexts.
Is it gross or net? Both net and gross are ways to describe a person’s or company’s income.
- Gross describes the total before deductions and taxes.
- Net describes the total after the deductions and taxes.
This daily series is an effort by Sahasriya for educating students on Spoken English classes and beyond. These vital tips ensures your Spoken English classes are more effective with Sahasriya which is what hundreds of students benefit everyday.