Gross Income vs Net Income

What is the definition of gross income?

• Net income after deductions

• Income earned from investments only

• Total income earned before deductions or taxes

• Total income after taxes

How do you calculate gross income?

• Subtract all expenses from net income.

• Multiply total income by the tax rate.

• Divide net income by the number of deductions.

• Add up all sources of income before deductions.

What is the definition of net income?

• Net income is the total amount of revenue left before expenses are deducted from the company's total revenue.

• Net income is the amount of revenue generated by a company before any deductions are made.

• Net income is the total amount of revenue left after all expenses have been deducted from the company's total revenue.

• Net income is the total amount of expenses left after all revenue has been deducted from the company's total expenses.

How do you calculate net income?

• Net Income = Total Revenue + Total Expenses

• Net Income = Total Revenue - Total Expenses

• Net Income = Total Revenue x Total Expenses

• Net Income = Total Revenue / Total Expenses

Explain the difference between gross and net income.

• Gross income is total income after deductions, while net income is income before deductions.

• Gross income is total income before deductions, while net income is income after deductions.

• Gross income is income before deductions, while net income is income after deductions.

• Gross income is income after deductions, while net income is total income before deductions.

If someone earns $5000 per month and pays $1000 in taxes, what is their gross income?

• $6000

• $5000

• $4000

• $3000

If someone earns $5000 per month and pays $1000 in taxes, what is their net income?

• $3000

• $6000

• $4000

• $2000

Why is it important to understand the difference between gross and net income?

• It has no impact on financial decisions

• It only applies to businesses, not individuals

• It is only relevant for tax purposes

• It helps individuals make informed financial decisions and budget effectively.

What are some common deductions that can reduce net income?

• Business expenses, depreciation, interest payments, charitable contributions

• Sales revenue, inventory costs, advertising expenses

• Travel expenses, office supplies, utilities

• Rent payments, insurance premiums, employee salaries

Give an example of a situation where gross income and net income would be significantly different.

• Receiving a tax refund

• Inheriting a large sum of money

• Winning the lottery

• Receiving a large signing bonus in a year