What Are Gross Earnings?

Gross earnings is the total amount of income earned over a period of time by an individual/household or a company. For individuals and households, gross earnings is the income earned before the deduction of taxes or adjustmen🔯ts.

In the corporate world, it's an accounting convention that refers to a public company's gross profit or the amount left from total revenues over a specified time period once the 澳洲幸运5官方开奖结果体彩网:cost of goods sold (COGS) is deducted.

Understanding Gross Earnings

Gross earnings are also commonly referred to in the financial sector as gross profit or gross income. As noted above, the term has dif𝓰ferent meanings de꧟pending on how it is used.

When referring to personal or household income, gross earnings are generally the first line of an employee's pay stub. This is followed by income and payroll taxes and other 澳洲幸运5官方开奖结果体彩网:deductions, such as employer-sponsored health insurance, life insurance, and retirement benefits. Once these deductions are accounted for, the employer lists the employee's ne🦂t earnings or income on the bottom of the paystub and on their paycheck.

Things work a little differently for businesses. When it comes to the business world, the term refers to the amount of money left from a public company's total revenue once the COGS is deducted. Also referred to as 澳洲幸运5官方开奖结果体彩网:gross profit, it is the income a company earns before any adjustments and other deductions, such as taxes. These other costs, such as administrative expenses, are not included and fall under a company's 澳洲幸运5官方开奖结果体彩网:operating income.

Gross Earnings on Business Income Statements

A company's gross earnings are reported periodically on its income statement. The first line of the income statement reports a company's total sales and revenues for a given time period, while the COGS and gross earnings often appear on the second and third lines of many income statements. The difference between revenue and COGS is a company's gross earnings.

The COGS includes costs directly related to the company's product, such as:

• Materials for manufacturing
• Inventory for shops
• Labor costs

Once a business calculates its gross earnings, it may subtract the rest of its business expenses, including costs such as utilities, loan repayments, office supplies, contractor fees, and many other eඣxpenses.

Gross Earnings vs. Adjusted Gross Income (AGI)

For tax purposes, the Internal Revenue Service (IRS) distinguishes gross earnings and adjusted gross income (AGI). Gross income includes all of the money you earn through the year including🦩 wages, income from a business, alimony paymen✱ts, rental income, interest, and a few other types of payments.

The IRS allows taxpayers to take a select number of 澳洲幸运5官方开奖结果体彩网:above-the-line deductions from gross income, and these include certain expenses incurred by educators, eligible moving expenses, contributions to IRA accounts as well as a few others. The difference between your gros𒁏s income and these deductions is your AGI.

When you complete your income tax return, you subtract a 澳洲幸运5官方开奖结果体彩网:standard deduction or a list of 澳洲幸运5官方开奖结果体彩网:itemized deductions from your AGI, and the ജdifference yields you⭕r taxable income, the amount upon which the IRS levies an income tax.

Examples of Gross Earnings

To understand individual gross earnings, consider Mr. Z, who earned a total of $50,000 for the recently completed fiscal year. He also paid $10,0𝄹00 in income tax, retirement contributions, and Socialꦿ Security payments. In this case, his gross earnings are $50,000, and his net earnings are $40,000.

But how does it work for businesses? Here's a simple example. Let's say Company X has sales of $2 million, cost of goods sold of $500,000, and expenses related to the sale of $300,000. The company's gross income is $1.5 million. After the other deductions, it is left with $1.2 million in 澳洲幸运5官方开奖结果体彩网:net income.

The Bottom Line

Gross earnings is how much income is generated by an individual before taxes, and for a business, it is the amount of income after costs of goods sold (COGS) are deducted from revenues. Gross income plays various roles in personal finance and business. When extending credit, lenders analyze gross income as a factor in the borrower's ability to pay back the loan. Gross margin can be calculated from gross earnings, which is a profitability measure for evaluating a company.