What is net?

In accounting, net usually refers to the combination of positive and negative amounts. For example, the amount of net sales is the combination of the amount of gross sales (a positive amount) and some negative amounts such as sales returns, sales allowances, and sales discounts. Hence, if gross sales are 990 and sales returns are 10, sales allowances are 5, and sales discounts 20, the net sales are 955 (990 minus 35).

Here are some additional examples of net:

  • net realizable value. The amount to be received in the ordinary course of business minus the costs of completion and disposal.
  • net property, plant and equipment. The recorded costs of the tangible noncurrent assets used in the business minus the related accumulated depreciation.
  • accounts receivable, net. The recorded amount of accounts receivable minus the allowance for doubtful accounts.
  • net cash provided by operating activities. The combination of the cash inflows and the cash outflows from a company's operations (activities outside of its investing and financing activities).
  • loss on disposal, net of tax. An accounting loss on the sale of a business segment minus the income taxes that were saved (avoided, sheltered) because the loss was also deductible on the company's income tax return.
  • net income. Revenues and gains minus expenses and losses.

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