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Chapter 8: Problem 28

What is gross income?

Short Answer

Expert verified
Gross income is an individual's or business's total income before any deductions like taxes, expenses, or allowable contributions.

Step by step solution

01

Define Gross income

Gross income is the total income earned by an individual or a business before any deductions such as taxes, expenses, or other contributions are made.
02

Contextualise the term

In the context of an individual, gross income includes salaries, wages, tips, bonuses, and any income from investments like dividends or interest. In the context of a business, gross income is usually referred to as gross profit, which is sales revenue minus cost of goods sold.
03

Distinguish Gross income from net income

It is crucial to distinguish gross income from net income. While gross income is income before deductions, net income is what remains after all deductions have been made. It is also known as 'take home pay' for individuals.

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