 Hello, in this lecture, we're going to define the term gross profit. According to fundamental accounting principles, while 22nd edition, the definition of gross profit is, it's also called gross margin, net sales minus cost of goods sold. So we're talking about net sales minus cost of goods sold. That means it's going to be an income statement amount. This is a calculation on the income statement. Usually a multi step income statement, often use when we have inventory, for example, merchandising companies, manufacturing companies, because we want to see the relationship between the sales amount and the amount of the cost of the goods that we sell. Remember that we're talking about net sales here. That can be confusing because we're not talking about net income. We're talking about net sales, which is really the basic sales number sales after we take into account sales returns and discounts. So in essence, we're talking about sales after we take into account sales returns and discounts or net sales. And in this case, we're saying that's 100,000. We're going to subtract out the cost of goods that we sold, the cost of the inventory, the expense without the term expense in it, the most important expense that we have being in this case, 75,000. That would give us a gross profit can also be called gross margin of the 25,000. This is often in the top section of a multi step income statement, rather than a single step income statement, which would just have revenue minus expenses. It is put in there as a sub total as we get down to the bottom line of the income statement, net income, because this relationship is such an important one, the one between sales and the cost of the inventory cost of the goods that we are then selling.