Question

Explain the difference between gross income, gross profit, operating income and comprehensive income. Why are each of these important to the users of financial statements?

Answer 1

Gross income means the amount of the total revenue from sales of goods or provision of service . This is the gross amount received.

Gross profit is the net amount of profit a company earns after deducting the costs of Goods sold from gross income

Operating income is essentially arrived at after deducting operating expenses, depreciation and amortization from gross profit

Comprehensive income is the sum total of both net income and unrealized gains a company earn in the current period

Gross income is also reffered to as top line of business

Gross profit is essential for determining profitability and the financial performance of a business

Operating income is crucial indicators of business health

Comprehensive income also includes unrealized gains