Dictionary / Price Margin
What does Price Margin mean in accounting?
Quick definition
GeneralGross margin. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
Read more below
Examples
Ticket leftover after the boot bill
You run a work-boot shop. On May 14 you invoice a roofing contractor $1,164 for six pairs of logger boots ticketed at $194 each. Your April 11 bill from a boot supplier for those pairs was $86 each ($516), the direct cost of the product sold. Price margin is $648: sales over that vendor cost, the same leftover as gross margin. In QuickBooks Online, the invoice shows $1,164 of sales and $516 of cost of sales when the boots leave the shelf; leave shop rent and clerk wages off this leftover when you decide whether $194 is still a good ticket.
August leftover after rent is not this
You run a stationery shop. August net sales are $14,860, including a $920 invoice on August 11 to a print shop for wedding suites, and the paper and envelopes that sold cost $5,340, so price margin is $9,520. You also booked $1,850 of shop rent, $3,640 of wages, and $280 of ads, and you tell your partner August price margin was $3,750. That leftover after overhead is net profit. Price margin is only sales over direct costs of the goods that sold; read it above the operating lines on the income statement.
Why it matters
Price margin is another name for gross margin: what is left of sales after you subtract only the direct costs of the products you sold. You will compute it every month-end if you sell merchandise, and again when you set a ticket or decide whether a line still covers vendor cost. Mix it with margin and you may be reading gross profit after the full cost of sales line; mix it with net profit and rent, wages, and ads already sit in the leftover, so a product that still covers its vendor cost looks like a loser. A broker loan against securities is borrowed cash, not leftover on a selling price, so do not treat a draw as this figure.
Keep learning
Start with the bookkeeping basics, then compare software when you are ready to pick a tool.
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What is Price Margin in bookkeeping?
When should I use Price Margin?
Use Price Margin when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Price Margin?
Price Margin is used for price margin entries, while Paid-In Surplus covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.