Some people confuse the terms sales and salary because they sound similar and both relate to income, but they have different meanings. The main difference is that one brings income to a business while the other brings income to an individual. It is also important to understand the difference between a "gross" and "net" figure in business accounting.
Gross sales or revenue is the total amount of money a business brings in before deducting costs. It is the amount that customers transmit to the company in the form of cash, checks and credit card payments. However, gross sales is not an accurate accounting of the company's actual sales. For instance, customers may request refunds, which reduces the actual sales total. So gross sales is a figure that estimates the amount of cash that flows into the business during a given period of time.
Net salary or pay is the amount of money a worker for the business takes home after taxes and other deductions. The company withholds the required taxes and fees (such as payments for employee benefits) from the gross salary, then cuts a check for the remaining amount. From a business' point of view for accounting purposes, net salary is the amount of cash that transmits from the company's bank account directly to the employee.
Sales and Salary
Sales and salary are both income sources for either a business or individual. But for a company, sales represent an addition to the accounting books while employee salaries represent a deduction. When recording this information on an income statement, the accountant lists gross sales at the top of the "Revenues" section and accounts for salaries under the "Expenses" section (wage expense).
Small Business Owners
For some small business owners, business sales is equivalent to salary. For instance, when a sole proprietor (one person who owns a business) receives a profit, he commonly uses the money as his own personal salary. The amount of sales profit (gross sales less returns and expenses) the sole proprietor takes in due to business activities is the gross salary before deducting personal income taxes.
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