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What is profit, income and revenue of an enterprise: we understand a serious issue. What is revenue, profit and income: how do they differ and what are formed from

Some of those people who want to start their own business do not understand the basics of economic theory at all. Profit, revenue, revenue... Sounds similar. However, they are not the same. If you are an aspiring entrepreneur, you just need to know how income differs from profit and revenue. And sometimes even experienced entrepreneurs confuse these terms.

What is revenue?

Revenue is all material assets received by an individual or legal entity as a result of entrepreneurial activity for a certain period: from the sale of goods, the provision of services, the performance of work. Most people think that revenue is all that goes into the cash register. This is not entirely true. Indeed, in retail sales, this is usually what happens: the goods are paid for immediately after they are received by the buyer. But it is a completely different matter if we are talking about mutual settlements between counterparty enterprises. In this case, the difference between the receipt of the goods by the buyer and the payment for the goods can be significant. Therefore, it is important to know that usually revenue in such cases is determined at the time of shipment of the goods (rendering services, etc.), regardless of whether this product is paid for.

What is the essence of income?

Income is the difference between the cost of goods and the proceeds from their sale. However, this only applies to goods. It is usually believed that since no material costs are incurred in the provision of services, the income is equal to the revenue.

Profit is a value that reflects the difference between income and the cost of obtaining it. It is profit that is the final and desired result of the activity of any entrepreneur.

Income and revenue are always positive values. And the profit can be not only positive, but also negative. After all, it may happen that all the costs (costs) of entrepreneurial activity are higher than the income received.

There are two types of profit: gross and net. Gross - this is such a profit that remains as a result of summing up all income and deducting expenses that are associated with the income received (for example, if income is received from the sale of a product, then the cost will be the cost of this product).

Net profit remains after deducting absolutely all expenses of the enterprise from income. These may be:

  • taxes;
  • Various fines;
  • Loan payment;
  • Expenses for payment of office rent and similar expenses.

Of course, all indicators are taken for a certain period.

There are two ways to determine the indicators under consideration.

The first method - “by shipment” (or accrual method), means that revenue (income, expense) is determined at the time of transfer of goods, performance of work, provision of services (and this does not depend on their actual payment). This method is usually used.

The second method - "on payment" (or the cash method), means that the organization's revenue, income or expense is determined at the time of actual payment for work, services, goods.

As a rule, this method is used in small organizations with cash. For example, in retail stores, where the transfer of goods almost coincides with its payment.

The second method has a number of disadvantages. Among them are, for example, the inability to fully control receivables and payables, since cash receipts are kept, but goods sold, services rendered, and work performed are not kept.

Profit is calculated as the difference between income and production costs, where income is an indicator of the financial performance of the enterprise, which reflects all financial receipts of the company, including manufactured and sold products paid for by the customer.

Costs are the costs of producing and selling products.

The profit indicator consists of three components:

  • profit from the sale of products is calculated as the difference between the funds received from the sale of goods (revenue) and the full cost of production;
  • profit from the sale of various property and material assets;
  • profit from non-realization of operations - funds received from the non-core activities of the company (securities, dividends, proceeds from the lease of property and other activities).

If the profit of the enterprise is reduced to zero, then the result of economic activity are costs.

Marginal profit is obtained by selling an additional copy of the product.

A high rate of such profit may not always show a really high profit.

Profit can be effectively managed only when not only accounting for funds by increasing the total cost of sales with a stable level of costs, but the maximum amount of profit that can be achieved under the prevailing conditions.

It should be remembered that setting a low price can undermine the profitability of a product or service. It is recommended to practice a reduction in pricing policy for a short time and in a small amount of goods, otherwise, with a large demand for such a product, the profitability of the enterprise as a whole will fall.

In order for a product or service not to fall in price, it is recommended to offer customers simpler analogues. Such a step helps to maintain the price distance and the attractiveness of products.

Types of profit

Profit is classified depending on the conditions of its formation. There are several types of profit.

Depending on the distribution costs:

  • accounting- profit received as the difference between the income from the sale and expenses (costs);
  • economic- profit received as the difference between accounting profit and additional costs (including costs that are not taken into account in the cost of production).

According to the final result of the company's economic activity:

  • normative(provided) - the minimum profit, which allows to ensure the financial stability of the enterprise;
  • maximum possible(or minimum allowable) - profit received at minimum cost and maximum revenue;
  • unreceived(lost profit) or loss - income that is not received due to violations of an obligation by the other party.

By the nature of taxation:

taxable- profit, which is subject to taxation in accordance with the law, is the difference between the total income from the sale of goods and non-sales operations, excluding losses of the previous period.

Tax free income- income received as a result of operations regulated by Article 251 of the Tax Code of the Russian Federation.

What is income?

Income represents the revenue received for a certain period as a result of the sale of goods and services, excluding material costs. Taxes are also deducted from this amount in accordance with the law.

Under the material costs refers to the amount spent on the production of products. Depreciation of fixed assets, social contributions and other costs, with the exception of wages, are also equated to such costs.

The constituent elements of income are profits and labor costs. The amount of income directly depends on the market value of the goods and market conditions.

Income does not include receipts from individuals and legal entities. If the income is taxable, then the amount that remains after paying the tax is divided into the following components:

  • consumption funds - costs for the social sphere (remuneration of employees);
  • investment income - the amount received as a result of investment activities;
  • insurance income - the cost of insurance premiums.

Income is classified according to costs.

Marginal revenue is calculated as the amount by which the total income of an enterprise changes after the sale of one unit of a good or service.

The resulting figure reflects the payback of the enterprise.

On its basis, in combination with marginal cost, management decides whether it is rational to expand the firm.

Average revenue shows the level of income received from the sale of one unit of goods. As a rule, this amount is equal to the price of the product. By controlling pricing, a company can regulate its own revenues.

Gross income is the result of a firm's economic activities, calculated as the difference between the cost of goods or services sold and the total cost of production.

What is revenue?

Revenue is the total amount of money received as a result of the sale of goods and services for a certain period of time.

The total revenue consists of the amounts received by the enterprise as a result of the main activity (sale of goods or services), investment activities (sale of non-current assets and securities) and financial activities of the enterprise.

Sales revenue is cash received from the sale of goods and services. It is divided into two types:

  • gross proceeds- represents the total amount of proceeds from the sale of goods, services, income from non-sales operations and property;
  • net proceeds- cash received after deducting VAT, taxes, discounts and the cost of returned products from gross revenue. It is from these funds that the calculation of dividends and amounts for the development of the enterprise is then carried out.

EBIT profit

Earnings Before Interest and Taxes (EBIT) is an intermediate value between gross and net income, it is income from which interest and taxes have not yet been deducted.

This is also referred to as operating income.

But it's not right. Unlike operating income, EBIT also includes non-operating income. If there are no non-operating income and expenses in EBIT, the indicator will be equal to operating profit.

EBIT is calculated from the income statement and is the sum of profit or loss before taxes and interest payable. A positive EBIT is considered normal.

EBITDA profit

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) depends on the depreciation method. This is the amount of earnings before interest, taxes and depreciation, which shows cash inflows.

Based on EBITDA, the company's debt burden is calculated. To do this, the total liabilities (long-term and short-term debt) are divided by the nominal value of EBITDA.

The value of total liabilities is available for calculations from the Liabilities section of the balance sheet. The normal value of the indicator should not exceed 3. If the value is 4 or more, then the company has a strong debt burden.

When calculating the debt burden indicator, it is necessary to take into account the degree of repayment of receivables. If the receivables are not repaid by buyers, the company loses its solvency, but this fact is not reflected in the indicator itself.

Video on the topic: “Profit and gross income, what is the difference?”

One of the basic concepts used in economics and business is revenue. It is with this concept that the activities of most enterprises are associated. Depending on the proceeds received, an entrepreneur can assess the demand for a particular product or service, resolve issues related to the production and purchase of goods in his favor. It is believed that it is the size of the profit that determines the success of the enterprise.

Basic definition

It would seem that revenue is the amount received in the course of the sale of goods. But this is far from being the case, since it depends on a number of nuances and characteristics. Previously, revenue was attributed to one of, but now there are disputes around this issue. Today it is considered income from the main activities of the company, but at the same time, other areas can be profitable.

The basic definition says: revenue is the total amount of money received for a certain period of activity from the sale or provision of services. It can take both a positive value and be equal to zero, but it will never take a negative value.

Receipt of revenue is the final stage in the work of any commercial organization. It is the main overall indicator of the performance of a company or firm. This indicator is planned in the first place, and on its basis the price of the product and its circulation are set. On the basis of revenue, all subsequent types of profit and income are calculated, conclusions are drawn about the demand for a particular product.

In the absence of profit, the company inevitably suffers losses, which ultimately leads to its ruin and closure.

Calculation methods

There are two main methods for calculating revenue. At the same time, a different concept of revenue is invested in each of them:

  • AT cash basis this concept means the money received by the seller of the goods from their sale. In fact, this is the amount of payment that the seller received in cash or through a non-cash payment. If the goods are released with a delay, the proceeds are not fixed until the money arrives at the seller's or seller's settlement account. In this case, all advances received are equated to revenue.
  • Revenue determination method by charge or shipment . In it, even those funds that were received in cash, and will also be paid through credit or deferred payment, are considered revenue. This method is often used in large companies.

Types of revenue

Revenue from the sale of products and services - funds received for the products or services shipped to customers. This type of income is divided into two types:

  1. , which takes into account all the money received for a product or service. In the case of barter payment, the full value of the exchange agreement. This amount includes not only taxes, but also various fees and duties, which are then paid to the state. The second name of this type of revenue that can be found is net revenue.
  2. Pure is the difference between gross revenue, taxes and excises. It is recorded in the profit and loss statements of the enterprise. Net revenue is also called gross revenue. It is she who forms the main income of the enterprise.

The difference between basic concepts and definitions in trade

In actions related to the sale of certain things and products, employees have to operate with such concepts as revenue, income and profit. But you should understand the difference between each of these terms.

Often, net revenue is correlated with the concept of income. But income is a broader concept. Thus, income is considered to be an increase in economic benefits from the receipt of various funds and, as a result, an increase in the capital of the organization. But income can have several sources, not only revenue, but also payment of fines, sanctions, interest from the bank. All this generates profit.

Money for the purchase of goods, taxes, payment of rent for premises, for sellers - expenses. If you subtract this amount from the income received from the sale of goods and services, you can make a profit.

Naturally, revenue significantly affects the income and profit of the enterprise and is one of its main components, but it is fundamentally wrong to equate revenue with these two concepts.

Revenue components

Revenue consists of two main components:

  • purchase price , that is, the cost at which the goods were purchased for sale or the material for its manufacture;
  • added value , that is, the amount that the seller adds to the purchase price in order to make a profit. Often this amount is a percentage of the purchase price of the product.

Thus, if the cost of goods is subtracted from the revenue, then you can get the amount of income received by the company in the course of its activities.

main sources

To date, revenue can be received from:

  • core business – sale of products, performance of works or provision of services. So, for a store it will be the sale of goods, for a law firm - the provision of legal services;
  • investment activity , which includes work with company shares, securities and even company assets that are not involved in the turnover. For example, a large corporation may sell part of its shares in order to obtain investment;
  • financial activity of the enterprise . For example, the owner of an enterprise invests money in a particular project in order to make a profit, puts money on a deposit in a bank, and others.

If you add up the funds received in these three areas, then in the end you can get the total profit of the enterprise.

For example, profit from core activities is 920,789 rubles per month, investment activities - 34,000 rubles, financial activities - 265,000, therefore, the total profit for the month will be: 920,789 + 34,000 + 265,000 \u003d 1,219,789 rubles.

In accounting, under this concept, funds received from the main activities of the company are accepted, while the rest of the funds are usually called “other income” or “interest income”.

Main functions

The main function that revenue performs is the reimbursement of the funds spent by the firm on the purchase or production of goods. Its timely receipt on the company's accounts ensures not only the stability of its work, but also the continuity of trade and the company's activities.

With the help of the received proceeds, the invoices of suppliers, both goods and materials, wages, taxes are paid. In addition, the proceeds received can be used to purchase a new product or material, expand the company's activities.

If the revenue arrives late, the company's activities incur losses, as its profit decreases, penalties may be imposed or contractual obligations associated with the production of goods, payment of certain bills may be violated.

Revenue calculation

For calculations, fairly simple formulas are used. It is enough to know the volume of products sold for a certain period of time and the unit cost, then multiply them. Further, the obtained values ​​for each group of goods are summarized. It should be noted that the funds received during the operation of the enterprise are not included in the revenue.

The formula looks like this

TR = P * Q, where

TR – revenue, rub.;

P – price, rub.;

Q - sales volume, unit/pc.

For example, let's calculate the revenue of the Vesna store from the following products:

  • Tea - sold 23 packages, the cost of each - 105 rubles.
  • Sugar - 3 kg, 40 rubles each.
  • Lemon - 1 kg, cost - 200 rubles.
  • The revenue for tea was - 23*105 = 2415;
  • Revenue for sugar - 3 * 40 \u003d 120;
  • Revenue per lemon - 1*200=200.

The total revenue of the store for this group of goods amounted to 2415 + 120 + 200 = 2735 rubles.

If the product was first sold at the same price, and then its value increased, then the revenue is calculated for each product depending on its value, and then added up.

For example, in early January, 120 packs of tea were brought to the Solnyshko store for 105 rubles each, and in February another 76, but with a cost of 110 rubles. At the same time, the store still has 20 packs of tea at the old cost.

During the month, the remaining 20 packs and 34 packs from the new batch were sold. Thus, the proceeds from the sale of tea in February will be: (20 * 105) + (34 * 110) \u003d 2,100 + 3,740 \u003d 5,840 rubles.

The data obtained in the course of calculations are considered information for internal use and are not included in the financial statements.

However, once a quarter or a year, these indicators are calculated by an accountant and recorded in the Profit and Loss Statement. In this case, the amount of revenue is indicated without indirect taxes and VAT (see also). Besides , in some cases, the amount received during the sale may not be wholly owned by the company. For example, when selling commission items, the seller receives revenue from the buyer, the bulk of which belongs to the owner of the goods.

For example, the following items were accepted for sale at the Solnyshko thrift store with the proviso that the people who provided them or the consignors would receive the following amounts:

  • Children's chair - 450 rubles.
  • Arena - 890 rubles.
  • Kangaroo - 500 rubles.

The sellers of the store also made a markup on the goods in the amount of 20%, that is, the total cost of things was: 540, 1068 and 600 rubles, respectively. After the sale of these things, the profit of the store "Solnyshko" amounted to:

(540 + 1068 + 600) - (450 + 890 + 500) \u003d 2 208 - 1840 \u003d 368 rubles. The remaining amount, according to the previously drawn up agreement, will be received by the committents.

The reports prepared by the accountant are submitted to the management of the company. On their basis, conclusions are drawn about which goods are in great demand, and which are less. Therefore, it helps to form the volume of purchases of a particular product.

Video: Revenue and profit

From the video lesson, you will learn what revenue is and how to calculate its main types: total, average and marginal. In addition, the lesson talks about profit, the main factors of its formation and its impact on the development of the company.

Learning is the money received in the course of the sale of goods or services. Thanks to the revenue, you can draw a conclusion about the work of the enterprise, adjust its activities. A delay in the receipt of revenue leads to losses for the enterprise, and its absence leads to its closure.

Many people dream of starting their own business, but not everyone knows where to start. Economists advise: start by learning the basics of economics, and only after understanding the basic principles, start building your business. If you find it difficult to flip through volumes of economic theory and pore over financial activities, then you can immediately move on to practice, but this does not mean that you will immediately make a profit. Although, perhaps the income from your activities will be significant. If you have not yet figured out whether there is a difference between profit and income, we suggest that you familiarize yourself with the differences between these two concepts.

Definition of income and profit

Income- these are all monetary or material values ​​received by an individual, legal entity, organization or state for a certain period.

Profit- something for which the activity of the entrepreneur is carried out, that is, the financial resources remaining after deducting the costs of production and sale of products.

Formula for calculating income and profit

These two financial performance indicators have a specific calculation formula.

So, income is calculated as follows:

Income = total revenue

Moreover, the sample is made for a certain period.

Profit is calculated using a different formula:

Profit \u003d income - all costs of production and sales.

Moreover, net profit, or, in simple terms, the money remaining in the hands of an entrepreneur, is profit from which taxes and other deductions have already been deducted.

Findings site

  1. Income is all the cash received over a certain period of time, while profit is cash minus taxes, production costs and other costs.
  2. Income is calculated as the total amount of money received as a result of the sale of goods or services, and profit is income minus the costs of producing, acquiring and selling goods or services.