Gross revenue refers to the total dollar amount of sales a company makes in a given period before any expenses are deducted. This is different from profit, which is what remains after all expenses have been subtracted.
Learn more about The Reporting
When gross revenue, which is also called gross sales, is recorded, it reflects all income from a sale on the income statement. There’s no consideration for any expenses from any source.
For instance, when reporting gross revenue, it doesn’t factor in the cost of goods sold (COGS) or any other deductions—it focuses solely on the money made from sales. So, if a shoemaker sells a pair of shoes for $100, the gross revenue would still be $100, even though the shoes cost $40 to produce.
The Emerging Issues Task Force addressed standardized gross versus net revenue reporting guidelines under generally accepted accounting principles (GAAP) back in 1999. This was later replaced by Accounting Standards Update No. 2014-09 (Topic 606), which was issued by the Financial Accounting Standards Board (FASB).
How to Calculate Gross Revenue
Gross Revenue = Number of items sold × Price per itemImagine you run a small coffee shop.
- You sell 1,000 cups of coffee
- Each cup costs $5
Gross Revenue = 1,000 × $5
Gross Revenue = $5,000Conclusion
It refers to the total money earned from sales. Businesses that are the main seller, have inventory at stake, set prices for their products, and hold other key responsibilities should report their gross revenue.