Gross profit
In accounting, gross profit means net revenue less cost of revenue, as an amount.
- Layer
- Lexicon
- Defined in
- Lexicon
- Components
- 1
Authority
This definition follows ASC 220.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
The lesson that teaches this
Accounting, 0 to 1 — a free course taught end to end on one month of one company, with the spreadsheet exercises to work it yourself.
Gross profit, in use
Quoted from the 2 documents that use the word — what it does to an interface, in the spec's own sentence.
Revenue → COGS → Gross profit → Operating expenses → Operating income → Other → Net income.
If the chart of accounts has no COGS, the component omits the gross profit subtotal rather than showing a gross margin equal to revenue, which is a lie by omission.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
- Cost of revenueThe costs of delivering what you sold. For a SaaS company that's usually hosting, third-party software inside the product, payment processing and customer support.
- How to read an income statement (P&L)Revenue, cost of revenue, gross margin, operating expenses and net income, read line by line, on accrual basis, with the mistakes founders make most.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- margin (margin is the ratio, not the amount)
Components that render this
The concept is not documentation-only. These are the components that name it in their specification, grouped and stated exactly as the catalog states them.
Components that render the terms it depends on
Little in the catalog names this concept outright, but its definition is built out of others that are named. These render revenue.
Terms this one depends on
- Cost of revenueThe direct costs of producing the goods or delivering the services sold in the period — the line gross profit is measured after
- RevenueInflows or enhancements of assets, or settlements of liabilities, from delivering goods or services — recognized when control transfers, not when cash arrives
Also in Foundations
Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.