What it is:
How it works (Example):
Let's assume restaurant chain XYZ sold $1 million worth of food last. The cost of that food was $330,000. Thus, the company's gross income was $1 million - $330,000 = $670,000.
Why it Matters:
Gross income does not exclude the cost of goods sold, general and administrative expenses, or other costs (those are typically incorporated in the operating income calculation).
For individuals, gross income is not the same as taxable income. For example, if John used $250 of his $1,000 a week to invest in his 401(k) plan, his gross income would be $1,000 but his taxable income would be $750.