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Understanding turnover, gross profit, and net profit

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Bookkeeping WalthamstowGetting a handle on your finances is one of the toughest experiences you can face, especially as a new business. If you choose to work with expert accountants however, you will have a far easier time here. We are the number one team excelling in bookkeeping Walthamstow has. Our people will make sure you are doing everything correctly and, most importantly, legally.

With bookkeeping, there are many important terms you have to learn. This includes turnover, gross profit, and net profit. By knowing them, you will be able to make better choices regarding your business. In this post, we are going to explain what they are.

What is turnover?

This is the total amount of cash you gain in exchange for supplying services or goods. Let’s use an example to demonstrate. You may run a fruit establishment, and you exclusively sell oranges. In this tax year, you sell 12,000 oranges, each for £1. As a result, your turnover is going to be 12,000 oranges x £1, which equals £12,000.

The gross profit

This is your turnover minus the costs of sales. The latter refers to how much money it directly costs you to sell products or services. For the majority of establishments, it is going to be the cost of raw materials or stock to make goods. With service businesses, it could be a stock image you buy for a particular client project. It could be that you couldn’t finish the job without said image. Another name used here is direct costs.

Then what is net profit?

This is the gross profit minus all of your other business expenses. It excludes the cost of sales though. Effectively, it is the money you have left over following all of your payments to make your company possible. This is the money you would have left over if you avoid taking cash out of the company for the year, except for expense payments.

Choose reliable bookkeeping in Walthamstow

At Brian G Lonis & Co, we have a thorough understanding of the profession we work in. In other words, we are the most reliable company to call on for support with various aspects of accounting. No matter the sector or size of your business, we will give you the help you need.

We are proud to be the top team specialising in bookkeeping Walthamstow has. So, if we can do anything for you, please let us know.