Net profit


                                                                                                                       

                
                                                                                                                 Essentially, net profit is gross profit minus all the costs incurred in order to make that profit. When producing a profit and loss statement, net profit can be shown as a figure before or after tax.
For example, imagine a retail shop selling jewellery and other accessories that are bought from a wholesaler. The takings for the year in question are £200,000 and the cost of purchasing these items from the wholesaler is £130,000, thus the gross profit is £70,000. However, the shop costs money to run; there are heating and lighting costs, staff wages and associated taxes such as National Insurance payments, rent, business rates and insurance. If the total cost of all these things is £40,000, the net profit would be £35,000.
In the case of a single unit in a chain of outlets, there may well be a problem in assigning various costs proportionately between the various units. The chain will probably have a headquarters and its costs need to be allocated in order to get representative figures for the various units. The way in which this process is carried out varies between organizations.     
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