How to Calculate Gross Sales

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Gross sales is typically the first line item listed on an income statement.
Gross sales is typically the first line item listed on an income statement. (Image: Yong Hian Lim/iStock/Getty Images)

Gross sales is the sum of sales revenue a company earned from selling all products, goods and services. All sales completed during the period are included in gross sales revenue regardless of whether the company has been paid yet. It's separate from other sources of revenue, like dividend and interest income, and is often used to calculate net sales.

Gross Sales Overview

Gross sales is the sum of all revenue earned from the sale of all products and services. Gross sales can be found on both a single-step and a multiple-step income statement. In both instances, gross sales is usually the first item listed in the revenue section of the income statement. It may also simply be referred to as "sales" or "sales revenue."

How to Calculate Gross Sales

Gross sales includes all sales completed during the period, regardless of whether a customer has paid for the product yet. As long as the business has delivered the product or service and is relatively sure that it will get paid, the sale still counts as revenue. For example, say that a company has sold $100,000 of products A and B this year. Of that amount, the company has shipped $80,000 worth of product and the rest is still in the warehouse. Gross sales revenue for the year would be $80,000 rather than $100,000.

Sales Revenue Versus Other Revenue

Sales is not always the only source of revenue for a company. Companies that purchase investments may earn dividends and make a gain if they sell investments for profit. If the business offers loans to other businesses or individuals, it may also have interest revenue. Gross sales revenue is only revenue from selling products and services. When calculating gross sales revenue, exclude any interest income, dividend income, and gains from investment and financing activities.

Gross Sales and Net Sales

Net sales is gross sales minus any sales discounts, sales allowances and sales returns. These accounts are considered contra-revenue accounts because they decrease the value of the gross sales revenue account. They are typically listed right underneath the gross sales line item on the income statement. If you know the value of net sales and these deductions, you can work backward to calculate gross sales. For example, say that net sales are $70,000, sales discounts are $3,000, sales allowances are $5,000 and sales returns are $2,000. By summing all the account values, you can conclude that gross sales are $80,000.

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