Gross Income Vs. Net Income

Economics is the study of the decisions we make. These are decisions that can be made by individuals, families, businesses or society. Trades and markets also play a key role in economics. See, if a workers do their job, they get paid and when with the money they made, they can buy the goods and services they need for their everyday life. At the same, the businesses they work for, get the services they paid for and the companies the workers got their goods from, gets the profit. Trade and markets is just one whole circle. Everything just goes around and around. But how do these businesses keep track of their income? This is where net income and gross income comes in.

Down below is the Economics guide and net income guide to understanding the difference between net income and gross income.

Basic Definitions

First of all, revenues is the income while expenses is the money spent.
Gross income – This is the amount of revenues that exceed the cost of the goods sold. In simpler terms, this is what is left of the income after all the expenses of making the products have been accounted for.
Net Income – This is the amount of revenues that exceed the total costs of producing those revenues. In simpler terms, it is the total revenues minus total expenses.

When Gross income and Net income are calculated

Gross income – This amount of income comes after all the expenses of goods sold are paid. It is the intermediate step to do in computing the net profit of the year.
Net income – This calculated at the end of the year by subtracting operating expenses from gross profit. This is the net of everything.


Gross Pay – this is the full amount pain by the employer.
Net Pay – this is the amount an employee gets in his or her paycheck with all the deductions he or she got, if any.