What is Gross Sales?

Gross sales reflect the sum of the total sales revenue generated by a business unit, on a pre-deduction basis from operating costs; also known as gross proceeds. In restaurants and POS systems, gross sales represent the total value of all transactions recorded before any deductions such as discounts, refunds, or returns are applied. The methodology used to compute gross sales is to summarize all the invoices (sales orders) or revenue transactions from the corresponding period.

The term gross sales does not take into account various factors that will reduce gross revenues to arrive at net sales, such as operating expenses, tax expenses, and other miscellaneous charges.

Gross Sales vs Net Sales

Gross sales are the sum of every sale that occurred in a company's records during a specified period. Net sales are the result of deducting gross sales from three items sales allowances, sales discounts, and sales returns.

The net sales amount reflects the total amount of price reductions offered to customers by way of discounts on merchandise and refund payments made to customers after a sale occurs. All three of the above deduction items are created to reduce the gross sales, and they will all have debit balances. Since the gross sales account always has a credit balance, the deductions will always serve as offsets to the gross sales account.