Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Gross Receipts

What it is:

Gross receipts, also called gross sales, usually refers to a company's revenue before subtracting discounts and returns.

How it works (Example):

Let's assume restaurant chain XYZ sold $1 million worth of sales for the year. The company would record this as gross receipts.

Gross receipts are not the same as net sales. If  the chain also offered $30,000 worth of discounts throughout the year to senior citizens, student groups and people who redeemed a certain coupon, and it also refunded $5,000 to unhappy customers during the year, restaurant chain XYZ's net sales are:

$1,000,000 - $30,000 - $5,000 = $965,000

Why it Matters:

Gross receipts do not account for certain price reductions, price adjustments, and refunds (always consult GAAP and IASB accounting rules and industry standards to determine what specific types of discounts are appropriate here; some are more appropriately recorded as marketing expenses). They are typically the number on which municipalities assess gross receipts or sales taxes.

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