What it is:
Gross sales usually refers to a company'sbefore subtracting discounts and returns.
How it works (Example):
Gross sales are not the same as net sales are:
$1,000,000 - $30,000 - $5,000 = $965,000
Typically, the company’s income statement would show $1 million of gross sales, then $35,000 in coupons and discounts, and then $965,000 of net sales.
Why it Matters:
Gross sales 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).
Gross sales also generally do not account for the cost of goods sold, general and administrative expenses, or other costs (those are typically incorporated in the operating income calculation). are generally intended to be a measure of the "real top line.”