What Is Gross Billing?
Gross billing is a term that is used to describe a complete calculation of all of the costs for rendering a service or for selling an item without any adjustments or allowances for the subtraction of any part of the equation. That is to say that gross billing takes into calculation all of the cost without any type of reduction due to any factor. This type of calculation is often times not truly representative of the true state of the sale since it does not take into account any further development or factor that may have affected the outcome of such an addition.
An example of the application of gross billing can be seen in a case where a company sells 100 boxes of oranges to a grocery store at the rate of $10 US Dollars (USD) each. The total plus six percent tax would be $1,060 USD, which is the gross billing. Assuming the grocery store returned 10 boxes to the company due to spoilages, that would mean the total sales for that particular transaction has been reduced by $106 USD, which was not regarded during the calculation of this billing. The direct opposite of gross billing is net billing where the cost of the returned oranges will be subtracted from the gross calculations to arrive at a more accurate figure. In this sense, gross billing calculations are often not a true representation of the state of a transaction for book keeping purposes, and the net billing must be used to arrive at a more accurate cost for various transactions.
Another place in which gross billing is often applied is in advertising, where the calculation of this type of billing must include the cost of the advert, commission and other agency charges. Other factors that may drive up the gross billings in this instance includes the price it costs the organization to put the advert into the different types of media, such as television, radio and magazines. The purpose of gross billing is to give a detailed picture of the transaction in its totality before any other types of considerations are added, which why the cost of transactions often reduce at the application of net billing — sometimes significantly. This same concept applies to the sales by department stores where a calculation would only include the total sales without making any type of adjustments for returns.
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