Gross and Net Profit Report
Overview
Below is a clear, business-focused explanation of the Gross and Net Profit Report, written for practical day‑to‑day use in Dafater.
Gross and Net Profit Report
Module: Accounts
Report Type: Script Report
Based on: General Ledger Entries
Overview – What This Report Tells You
The Gross and Net Profit Report shows how profitable your business is for a selected period by comparing:
- Revenue (Sales / Income)
- Cost of Goods Sold (Direct Costs)
- Operating and Other Expenses
It calculates both:
- Gross Profit – profit after direct costs
- Net Profit – final profit after all expenses
This report answers a critical business question:
“Are we actually making money, and where is it being earned or lost?”
When and Why to Use This Report
You should use this report when you want to:
- Review overall business performance
- Understand profitability trends over a period
- Monitor expense control
- Support management reviews, board meetings, or financial reporting
- Compare profitability across months, quarters, or years
- Prepare for tax planning or audits
It is commonly reviewed:
- Monthly by management
- Quarterly for strategic decisions
- Annually for financial closing and planning
Key Business Sections and What They Mean
1. Income (Revenue)
Shows all income generated from your core business activities.
Business meaning: - Reflects how well your business is selling - Higher income does not automatically mean higher profit
2. Cost of Goods Sold (COGS)
Represents direct costs required to deliver goods or services, such as: - Purchase costs - Production costs - Direct labor (if applicable)
Business meaning: - Indicates how efficiently you produce or deliver - Rising costs here reduce gross profit immediately
3. Gross Profit
Gross Profit = Income – Cost of Goods Sold
Business meaning: - Shows profitability before operating expenses - Helps assess pricing strategy and cost control - A strong gross profit indicates a healthy core business
4. Operating Expenses
Includes indirect costs such as: - Salaries and wages - Rent and utilities - Marketing and advertising - Administrative and office expenses
Business meaning: - Reflects how expensive it is to run the business - Excessive expenses can erode profits even with strong sales
5. Net Profit
Net Profit = Gross Profit – All Expenses
Business meaning: - Final bottom-line result - Shows what the business actually earns or loses - Used for dividend decisions, reinvestment, and growth planning
Key Columns Explained in Business Terms
Account Name
Shows the income or expense categoryAmount
Value posted for each account during the selected periodTotal
Summarized value for each section (Income, Expenses, Profit)Profit / Loss Figures
Indicate whether the business is operating at a surplus or deficit
Available Filters and Their Business Purpose
Company
- Used when managing multiple legal entities
- Ensures profit is reviewed for the correct business
From Date / To Date
- Defines the reporting period
- Useful for monthly, quarterly, or yearly comparisons
Fiscal Year
- Helps align results with official financial reporting periods
Cost Center (if applicable)
- Allows profitability analysis by department, branch, or location
- Useful for performance accountability
Project (if applicable)
- Evaluates profitability of specific projects or initiatives
How to Interpret the Results for Business Decisions
Scenario 1: High Revenue but Low Net Profit
- Indicates high operating or indirect expenses
- Action: Review overheads and expense controls
Scenario 2: Low Gross Profit Margin
- Suggests pricing issues or high direct costs
- Action: Re-evaluate pricing, suppliers, or production efficiency
Scenario 3: Consistent Net Loss
- Business model may not be sustainable
- Action: Cost restructuring or revenue strategy review needed
Scenario 4: Improving Net Profit Over Time
- Indicates healthy growth and effective cost management
- Action: Consider expansion or reinvestment
Common Business Use Cases
- Monthly management performance review
- Budget vs actual comparison
- Identifying cost leakage areas
- Preparing financial statements for stakeholders
- Supporting strategic decisions like:
- Pricing changes
- Cost-cutting initiatives
- Expansion planning
- Evaluating business sustainability
Summary
The Gross and Net Profit Report in Dafater is a critical financial tool that:
- Shows where money is earned and spent
- Measures business efficiency and sustainability
- Supports informed, data-driven management decisions
Regular review of this report ensures your business stays profitable, competitive, and financially healthy.
Report Information
- Module: Accounts
- Related DocType: GL Entry
- Report Type: Script Report
- Standard: Yes