Gross billing is a calculation of all costs without any adjustment or allowance for subtraction, often not representative of the true state of a sale. Net billing is more accurate as it subtracts costs like returns. Gross billing is used in advertising and department store sales.
Gross billing is a term used to describe a complete calculation of all costs to provide a service or to sell an item without any adjustment or allowance for subtraction of any part of the equation. This means that gross billing takes into account all costs without any type of reduction due to any factor. This type of calculation is often not truly representative of the true state of the sale, since it does not take into account any additional developments or factors that may have affected the result of said addition.
An example of the application of gross turnover can be seen in a case where a company sells 100 boxes of oranges to a grocery store at a rate of $10 US dollars (USD) each. The total plus six percent tax would be $1,060 USD, which is gross billing. Assuming that the grocery store returned 10 cases to the business due to spoilage, that would mean that the total sales for that particular transaction were reduced by $106 USD, which was not considered during the calculation of this billing. The direct opposite of gross billing is net billing, where the cost of returned oranges will be subtracted from the gross calculations to arrive at a more accurate figure. In this regard, gross billing calculations are often not a true representation of the status of a transaction for accounting purposes, and net billing should be used to arrive at a more accurate cost for various transactions.
Another place where gross billing is often applied is in advertising, where the calculation of gross billing must include ad cost, commission, and other agency charges. Other factors that can increase gross billing in this case include the price it costs for the organization to place the ad in different types of media, such as television, radio, and magazines. The purpose of gross billing is to give a detailed picture of the transaction as a whole before adding any other considerations, which is why the cost of transactions is often reduced by applying net billing, sometimes significantly. . This same concept applies to department store sales where a calculation would only include total sales without making any adjustments for returns.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
