As an Amazon seller, it’s essential to understand the difference between gross and net income. These two terms are often used interchangeably, but they represent two distinct concepts that can have a significant impact on your business finances. In this blog post, we will define gross and net income and explain how they apply to your Amazon seller account.

Gross Income for Amazon Sellers

Gross income is the total revenue generated from your Amazon sales before any expenses are deducted. This includes the selling price of your products and any shipping and handling fees charged to your customers. Gross income is also referred to as “gross sales” or “gross receipts.”

For example, let’s say you sold 100 products on Amazon for $10 each, and the shipping and handling fees for each product were $2. Your gross income would be $1,200 ($1,000 for product sales + $200 for shipping and handling fees).

Net Income for Amazon Sellers

Net income is the amount of revenue that remains after deducting all business expenses from gross income. These expenses include the cost of goods sold, Amazon fees, shipping costs, advertising expenses, and any other expenses related to your Amazon business.

For example, if the cost of goods sold for the 100 products sold in the previous example was $400, and Amazon fees and shipping costs were $200, your net income would be $600 ($1,200 gross income – $400 cost of goods sold – $200 Amazon fees and shipping costs).

The Importance of Gross and Net Income for Amazon Sellers

Understanding your gross and net income is critical for tracking the financial health of your Amazon business. Gross income tells you how much revenue your business is generating, while net income gives you a more accurate picture of how much money you’re actually making after all expenses are deducted.

By keeping track of your gross and net income, you can make informed decisions about pricing, marketing, and expenses. For example, if your net income is consistently low, you may need to review your expenses to see where you can cut costs or adjust your pricing strategy to increase your profits.

In addition, having accurate records of your gross and net income is essential for tax purposes. You’ll need to report your gross income on your tax return, but you can deduct your expenses from your net income to determine your taxable income.

Conclusion

As an Amazon seller, it’s essential to understand the difference between gross and net income. Gross income is the total revenue generated from your Amazon sales, while net income is the amount of revenue that remains after deducting all business expenses. Keeping accurate records of your gross and net income is crucial for tracking the financial health of your business, making informed decisions, and preparing for taxes. By following these best practices, you can ensure that your Amazon seller accounting is accurate and up-to-date.