Disambiguation of Key [ Income Statement ] Line Items

_Example provided is for a F&B business._

Collections : What is collected from customer ...

= [ net sales ] + [ SST ]

*SALES*

Gross Sales : Big number that is rarely reported ... because it is ...

= [ net sales ] + [ sales discounts ] + [ sales allowances (price reductions due to defective goods) ] + [ sales returns ]

Net Sales : Actually useful ...

= [ gross profit ] + [ direct costs ]: 

*DIRECT & INDIRECT COSTS*

These refer to the costs of production of goods and services sold.

[ Cost of Sales ; 

Cost of Goods Sold ; 

Direct Costs_or_Expenses ] ... all of these terms mean the same thing; some may be _fixed_ such as the rental on a dishwashing machine, some may be _variable_ such as the ingredients used to make pies.

Indirect Costs_or_Expenses : How much would be spent during a fictional 0-production month, such as in pre-opening, on [ labour ex-production ], [ materials ex-production ], [ utilities ex-production ], [ ads ], [ interest owed on loans ], [ amortised charges like annual fees ], [ depreciation of CAPEX ],  etc.; some may be _fixed_ such as the rental of a premise, some may be _variable_ such as seasonal maintenance.

Direct Costs : 

= [ total costs ] - [ indirect costs ]

... therefore 

*NET SALES is sales, [after deducting allowances, discounts, and returns], but [before deducting the following]*

- fee of : performance marketing

- fee of : middleman (POS, platform, etc.)

- fee of : PSP / payment service providers

- fee of : transportation / delivery

- cost of labour for production

- cost of materials for production

- cost of utilities for production

*PROFIT a.k.a. EARNINGS a.k.a. INCOME*

Gross Profit :

= [ net sales ] - [ direct costs ]

At this point in the income statement, we encounter *EB-salad* because there are all sorts of "Earnings Before X" subtotals which an author may choose to write about. But in general ...

Net Profit :

= [ gross profit ] - [ indirect costs ] - [ tax ]