home Calculators What is the difference between profit and enterprise income? What is the difference between operating profit and gross profit?

What is the difference between profit and enterprise income? What is the difference between operating profit and gross profit?

A clear understanding of economic categories and income makes it possible to correctly plan and implement your steps, decisions and actions in real economic activity.

The most common misconception is that revenue refers to all cash receipts to sellers at markets and retail outlets, to cash registers and to current accounts. After all, other income may come to the current account, for example:

return of excess advance payments previously transferred by the company to suppliers
charitable funds not related to economic activities
loans, borrowings, advances under agreements concluded with banking and other financial institutions
social insurance fund amounts for accrued sick leave

Cash desks also sometimes receive funds not related to sales, for example:

funds received from the bank to pay wages
fees, repayment of advance reports, loans received
dividends received for payment to the founders of the company, firm
caused by an employee to the enterprise

Another common mistake is to understand revenue as the receipt of funds, exclusively in cash. But in practice, there are often cases when the buyer pays for shipped products or services performed with a counter-delivery.

Task. The company, under a supply agreement, shipped goods worth 100 thousand rubles to a private company. The company provided transport services to the company in the amount of 20 thousand rubles, and transferred 80 thousand rubles to the company’s bank account. How much revenue did the company receive from these?

Answer. 20 + 80 = 100 thousand rubles.

Based on the above facts, the following should be considered an accurate definition:

Revenue is monetary, material or other economic benefits received by an enterprise for goods, work, and services supplied.

The concept and essence of income

Is a broader concept.

State revenues include all sources of funds received into the state budget in accordance with established codes, laws, and other regulations, for example:

taxes, fees, duties, excise taxes, fines
receipts from the provision of public services
from foreign economic activity
from previously provided installment plans, loans

The income of a family or a citizen includes the benefits they receive in the form of wages, benefits, scholarships from the sale of what is grown on a farmstead, summer cottage, or from the sale of a car, house construction, apartment and income from other sources.

Income of business entities includes income from all possible types of business activity minus indirect taxes and fees (value added tax, turnover tax, excise taxes).

For the purposes of accounting and statistical accounting, economic planning, income is usually distributed by type:

What is the difference between income and revenue?

The concept of “revenue” is limited in relation to receipts from the sale of goods or services provided, or work performed.

“Income” has a broader scope.

Gross income refers to all types of income specified in the previous section.

Gross income - indirect taxes, customs duties, excise taxes.

In retail trade, the amount of revenue is determined by receipts at the cash registers of a company or firm, and net income is determined by the amount of realized markups on goods sold and received trade discounts from suppliers.

Income from financial and investment activities is also not determined by the amount of funds actually received into the current account, but is calculated as the final result of transactions with a financial or investment asset.

Another important concept of revenue and income is the methodology for their determination. Example. Accounts payable recognized as uncollectible in the amount of 50 thousand rubles were written off. This amount is included in the non-operating income of the enterprise.

As a result of this business transaction, the enterprise did not receive material benefits in the form of cash or material resources, which is typical for receiving revenue. The basis for including this amount in income was the reduction of obligations to suppliers.

It is the income in relation to the expenses of business entities for individual types of their activities and for the enterprise and corporation as a whole that make it possible to determine its final financial result - a general indicator that is most of interest to the owners and users of official statistical reporting.

Therefore, the correct understanding of both the revenue and income of a company, firm, organization and the exact answer to the question: “income and revenue, what is the difference?” is of paramount importance.

Write your question in the form below

Discussion: 9 comments

Since school age, we have been learning in law lessons what income and revenue are. But since I didn’t listen well to the teachers at school, I didn’t remember these definitions well. Now I understand perfectly well the difference between income and revenue.

Answer

I once studied to become an accountant and even managed to work as an accountant for a little while, but I’ve been on maternity leave for two years now, and I’m planning to get out soon and brush up on my knowledge. I had forgotten the difference between income and revenue.

Answer

Such simple concepts, but there are quite a lot of nuances in each of them. I think these concepts need to be understood at the training stage, the most important thing is to understand the essence, then everything will be much simpler.

Answer

Understanding the difference between profit, income and revenue is one of the basics taught to future accountants or economists. I have an economics education, and, as far as I remember, teachers in any course could ask a question about the difference between these concepts.

Answer

Gross income is revenue from the sale of goods and services minus their purchase price.

Gross income is generated from trade markups, receipts for services rendered and work performed (delivery of goods to your home, cutting fabrics, assembly and installation of furniture, etc.), other income from non-core activities (sale of surplus equipment, rental of premises and facilities small retail network, income from equity participation in the activities of other enterprises from securities owned by the enterprise, the balance of income and expenses from non-operating transactions, etc.).

Gross income is calculated using the following formula:

VD = N + Su + Pd,

where VD is gross income;

N - amount of trade markup;

Su - cost of services provided;

PD - other income.

Gross income is calculated by two main indicators: absolute amount (in rubles) and level (%).

The level of gross income is calculated as the ratio of the amount of gross income to the absolute amount of retail turnover multiplied by 100%.

Profit

Profit from trading activities is the difference between gross income and distribution costs. Profit is the main indicator of the economic activity of a trading enterprise.

Profit is measured by two main indicators - amount and level. If the amount of profit is less than the absolute amount of distribution costs, then the financial result of the enterprise’s economic activity will be a loss.

Accounting (gross) profit is the difference between gross income and distribution costs.

It is known that not all costs of a trading enterprise are included in distribution costs. Part of the costs incurred by the enterprise at the expense of profits is not considered distribution costs. The sum of the enterprise's costs, taken into account as part of distribution costs and attributable to profit, forms economic costs (all actual expenses of a trading enterprise).

Economic profit is the difference between gross income and economic costs.

Based on this indicator, one can judge the amount of entrepreneurial income, which indicates the recoupment of expenses of a trading enterprise (entrepreneur) and its ability to self-development.

Profit (loss) from the sale of goods and services is the difference between gross income from the sale of goods and services (excluding VAT) and distribution costs.

Profit from the sale of fixed assets and other property is calculated as the difference between the sale price and the original or residual value of these assets and property, increased by the inflation index.

Income (expenses) from non-operating operations include: income received from equity participation in the activities of other enterprises, dividends on shares, interest on bonds and other securities owned by the enterprise, income from leasing property, etc. In non-operating expenses tax payments attributable to the financial results of the enterprise’s activities are taken into account (property tax, transport tax, etc.).

Taxable income is the portion of gross income that is subject to tax. When calculating taxable profit, amounts taxed at the established rates at the source of their payment are excluded from gross profit. These are income from rent, rental of video and audio cassettes, dividends on shares, interest on bonds and other securities owned by a trading enterprise, income from equity participation in the activities of other enterprises, profit from intermediary operations and transactions.

From the above it follows that profit in trade performs the following main functions: an evaluative indicator of the enterprise’s activity, acts as a source of material incentives for workers, remuneration for section owners, shares in the authorized capital of the enterprise, and also serves as a source of self-financing of the enterprise and replenishment of the state budget.

It is used for investment in the production process, for organizing reserve funds and for increasing working capital. Its size depends on several factors:

tax burden on the organization, additional payments;
enterprise revenue;
cost of goods, etc.

Calculate all production costs (including material costs).
Calculate gross income (the difference between funds received from sales and the costs of manufacturing products).
Now you can calculate your net profit. The formula for calculating it is as follows:

Net profit = Gross income - mandatory payments (taxes and other payments).

What is profit - a detailed analysis of the concept

what is the profitability of the divisions, taking into account the distribution of total expenses on them (or not);
what is the cost and how does it affect pricing;
what is the margin of financial strength?

Essentially, this is a method of generating operating profit by managing cost lines. It helps to find the optimal balance between:

price of products;
variable and fixed types of costs;
production volumes.

The technique boils down to the fact that the results of several financial instruments are processed at once, including financial analysis, cost accounting, marketing research, etc. When managing costs, a whole range of results obtained from monitoring, analyzing and structuring costs is taken into account.

Operating profit: formula

In this article we will look in detail at the types of profit and how to calculate them, but we will immediately make a reservation that the terms “revenue” and “profit” should be distinguished. The amount obtained after subtracting costs from revenue is profit. Thus, the general formula for calculating profit will look like this: Profit = Revenue - Costs (in financial terms) Contents

What is net profit? The net profit of an enterprise is the funds remaining from the balance sheet profit after deducting taxes, fees, deductions and other established payments to the budget.

Operating profit (ebit) and the formula for calculating it

Attention

Operating profit (ebit) and the formula for its calculation Attention When calculating this indicator of operating profit, income from the rental of company property, from fluctuations in exchange rate differences, from the possible sale of working capital, as well as from the reimbursement of assets that were previously subject to write-off are not taken into account. Factors in the formation of a company's income The formation of a company's income from its core activities depends on the influence of many external and internal conditions. External conditions do not depend on the actions carried out by the company, but nevertheless have a significant impact on fluctuations in profit, so they must be taken into account.

What is operating profit: what is it made up of and how is it calculated. This is the sum of the rental, patent and interest income of the organization.

A bank’s refusal to carry out a transaction can be appealed. The Bank of Russia has developed requirements for an application that a bank client (organization, individual entrepreneur, individual) can send to an interdepartmental commission in the event that the bank refuses to make a payment or enter into a bank account (deposit) agreement.< … «Больничное» пособие: нужно ли выплачивать за отработанные дни болезни В случае, когда в день оформления листка нетрудоспособности сотрудник находился на рабочем месте и получил за этот день зарплату, «больничное» пособие за этот день не начисляется. < … Главная → Бухгалтерские консультации → Бухгалтерский учет Обновление: 22 августа 2017 г.

What is operating profit: what does it consist of and how is it calculated

What is Gross Profit Gross profit is the difference between the amount received from the sale of a product and the cost of that product. The difference between gross and net is that gross is the profit that is received before the deduction of mandatory deductions and deductions. It does not include expenses for paying taxes and other established payments.

To correctly calculate gross profit, you need to take into account all expenses, including the cost of goods. Cost is the total cost of producing a product, expressed in financial terms. Read also an article comparing the concepts: revenue, income and profit.
There are two categories of factors that influence gross profit.

Gross profit

Features of the operating profit indicator
- What is this indicator made of?
How to calculate profit from the main activity
Principles of generating and managing profits from core activities
Operating profit indicator: what is it for?
- Difference between net and operating profit indicators
Factors generating company income

Features of the operating profit indicator Profit of this kind is a fairly important economic indicator, which is calculated on the basis of data reflected in the financial statements of the company and which is significant enough to determine its investment attractiveness.

Operating profit

Indicator name Line code For 2013 For 2014 Gross profit 2100 60,000 100,000 Selling costs 2210 5,000 7,000 Management costs 2220 15,000 25,000 Other income 2340 2,000 1,500 Other expenses 2350 3,000 3,000 Book profit 2,300 49,000 76,500 Interest payable 2,330 9,000 13,000 In this calculation example, operating profit is: OP2013 = GR – CE – ME – OE + OR + PC = 60,000 – 5,000 – 15,000 – 3,000 + 2,000 + 9,000 = 48,000 rubles OP2014 = GR – CE – ME – OE + OR + PC = 100,000 – 7,000 – 25,000 – 3000 + 1,500 + 13,000 = 79,500 rubles or OP2013 = BP + PC = 49,000 + 9,000 = 58,000 rubles OP2014 = BP + PC = 76,500 + 13,000 = 89,500 rubles What is the difference between operating profit and profit before tax Operating profit is not reflected in the financial statements and consists of the balance sheet profit and interest payable.
In other words, operating profit is the amount remaining after deducting depreciation, rent, payment for fuel and lubricants and other operating expenses from profit. Operating profit does not exclude funds for paying taxes and overpayments on the loan. It is calculated, in general, according to the following formula: OP = VP - KR - UR - PrR + PrD + Prts OP - operating profit VP - gross profit KR - commercial expenses UR - management expenses PrP - other expenses PrD - other income Prts - interest payable In general, operating profit allows you to view the complex of costs and income of the enterprise as a whole, while simultaneously making it possible to evaluate in detail the most profitable or, conversely, unprofitable budget columns.
In addition, it makes it possible to finally prepare accounting documents for the preparation of balance sheet profit.
What does operating profit consist of? The main factors in generating operating profit include the following:

Volume of finished products sold.

The cost of manufactured products, their wholesale and retail prices.

Assortment and structure of the product line.

Each of the described factors consists of smaller elements, for example, the cost of production includes labor costs and the amount of accrued depreciation. How to calculate operating profit? The following formula is used for the calculation: Operating Profit = Gross Profit (GP) + Operating Revenue (OR) – Operating Expenses (OE), where GP is the organization’s gross profit, OR is operating income, OE is operating expenses. The calculation procedure goes like this:

What is the difference between operating profit and gross profit?

The calculation of balance sheet profit looks like this: OP = BP + PC, where OP (operating profit) is operating profit, rub.; BP (balanceprofit) – balance sheet profit, rub.; PC (percent) – interest payable, rub. Balance calculation formula OP = line 2100 – line 2210 – line 2220 – line 2350 + line 2340 + line 2330, where line 2100 is gross profit, rub.; line 2210 – commercial costs, rub.; line 2220 – management costs, rub.; line 2350 – other expenses, rub.; line 2340 – other income, rub.; line 2330 – interest payable, rub. or OP = line 2300 + line 2330, where line 2300 is profit before tax (balance sheet), rub.; line 2330 – interest payable, rub. Calculation example The company Ekran LLC is engaged in the production of drills for milling machines.

Few ordinary people will be able to answer the question of how income differs from profit. Both concepts mean the arrival of funds and the possibility of investing them in the future. How these indicators relate to revenue is also a mystery for the reader who is not savvy in economic matters. However, this oversight is easy to eliminate; just understand the terminology.

What is meant by the term "revenue"

The first is the difference between revenue and accounting (that is, explicit, calculated) costs.

Taking into account economic costs, including implicit costs associated with an alternative in conditions of limited resources, we will now talk about economic profit: revenue minus economic costs.

Let's look at an example. Since the head of a passenger transportation company at one time chose the path of an entrepreneur, rather than the path of an employee with savings in a bank, he faced alternative economic costs, for example, the following:

savings in a bank account that were invested in business development - 60 tr.
lost interest on money remaining in the bank - 6 tr.
lost wages from hired work per year - 180 tr.

It turns out that the annual profit of 240 tr, which we calculated earlier, should be reduced by the amount of economic costs:

240 t.r. - (180 t.r.+60t.r.+6t.r.) = -6 t.r.

This business for an entrepreneur will not pay for itself in a year. If the company’s accountant congratulates the manager on his annual profit, the entrepreneur himself will assess the business’s performance as satisfactory.

Summary

Let’s summarize and answer the question of how income differs from profit, what is the difference between them and revenue, highlighting the main points briefly:

Revenue and income are always positive economic indicators. Profit can be positive (the company is profitable), negative (the company is unprofitable) and equal to zero (the company is at the break-even point).
Income includes profit, as well as costs for remuneration of employees of the enterprise and the social component of internal policy.
Profit is a calculated indicator. It can take into account implicit economic costs. Income can always be calculated and entered into the balance sheet.
Another difference between income and profit is the legislative connection: commercial enterprises work to achieve profit, non-profit enterprises should not receive profit at all, and municipal enterprises can be profitable, but subsidies only imply breaking even. All businesses can receive income.

Thus, revealing small terminological nuances of the profitable part of enterprises’ activities will allow readers to become more savvy in economic issues.