Information to Help You Make Wise Business Decisions(and put you on the right path)
An Operating Expense is an expense that occurs in the daily operations of a company.
Taking this one step further, it's also important to realize that operating expenses can be divided into fixed and variable expenses.
Gross profit is the profit you make after deducting the costs associated with selling your product or revenue.
The calculation for this account is simple : Revenue - Cost of Goods Sold = Gross Profit.
Cost of Goods Sold (COGS) is exactly how the name states, the cost of a product that has been sold. If you're a retailer, this amount is easily calculated.
If you're a manufacturer, more complex accounting takes place.
In short, COGS is the difference between your selling price (revenue) and profit (the amount you gained from a sale).
Revenue is the amount of money that a company earns. If you mow 10 lawns for $10 a piece, you have $100 in revenue.
It's also important to remember the difference between gross and net revenue. Gross revenue is the total amount of billings, net revenue is the total amount of billings minus any discounts or returns.