What the gross margin shows. Definition and formula for calculating gross profit. See what "Gross Profit" is in other dictionaries

What is meant by gross profit? In general, the concept of profit is defined as the difference between income and expenses, but gross profit is a characteristic of production efficiency and financial regulation at the enterprise as a whole. That is, gross profit is determined as the difference between the proceeds from the sale of goods or the provision of services and their cost.

There are many factors that can affect gross margins. Usually they are divided into two types, the first is those that depend on the activities of the enterprise, the second are independent. The first category includes:

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Expansion of the range.
Increase in the volume of production.
Acceleration of product sales.
Improving quality.
Increase in labor efficiency.
Reducing the cost.
Improving your marketing strategy.

Geographic.
Legislative regulation.
Natural.
Geographic.
World changes.
Changing the attitude of the state towards private entrepreneurship.

More important, of course, are those factors that the company can influence, because it depends on it whether they will use its goods and services.

Take pricing policy, for example. In a modern market economy, entrepreneurs simply have no choice but to formulate their pricing competently. They need to know how to approach a customer in order to both entice him and not lose extra money at the same time.

Of course, you should not strive for an endless reduction in the price tag, yes, in this way you can increase turnover, but this is not the best course to achieve the financial well-being of the enterprise. Decent sales volume with a good price is better than trying to stick in as much and cheaply as possible, in which case you never know what the next reporting period will be.

Or, for example, an analysis of profitability, with a correct assessment of demand, you can increase the production of demanded goods and reduce or completely remove from production any category of goods. This way the company will get the maximum benefit from the right products and reduce the costs of unclaimed production.

Gross and net profit

We have already sorted out a little with gross profit, now we need to consider what net profit is and how it differs from gross profit. So, in simple terms, net profit is the income received by the enterprise minus all payments in a certain period.

It is obtained by deducting from the gross profit of all funds spent on the main payments of the enterprise. These payments most often include:

Penalties.
Interest on loans.
Other operating expenses.

It is on the basis of the net profit that the quality of the organization's work is assessed, it is reflected in the main financial document - the balance sheet.

Calculation of net profit is usually not difficult, the main thing is to know some numbers. Initially, you need to decide on the time period for which the profit will be calculated. When the time period is determined, you can start calculating.

When calculating, the following indicators are taken into account:

Gross profit (denote - a).
Financial profit (this is b).
Other operating expenses (c).
Taxes (n).
We will also indicate the variable for the net profit (Y).

So, the formula for calculating net profit is simple - Y = a + b + c-n.

You ask - and yet, what is the difference between net profit and gross profit? Everything is very simple, net profit is the result that the company receives after deducting all its costs not only for production, but also those funds that went to pay off payments on loans, fines and other categories. As for the gross profit, as mentioned above, it is simply the difference between the income from the sale and the cost of production, excluding the cost of paying off payments.

Calculation methods

Gross profit can be calculated in several ways, each of which is chosen along the path of least resistance - it is simpler and it is calculated.

Through the average percentage

This is the most commonly used method in retail.

First, let's decide on the values that we need:

TO - turnover.
SP is the average percentage of gross income. It is calculated as follows - SP = (a + b - c) / (TO + d) * 100%.
- Here a is the trade markup for the remaining unsold goods.
- b - mark-up for newly received goods during the reporting period.
- c - markup for out-of-circulation goods (return to the supplier, damage, etc.).
- d - balances of goods at the end of the reporting period

Thus, we get the formula for calculating gross profit: VD = TO * SP / 10 0

By assortment of goods

This method is used if the assortment of goods is quite large and all goods are different, and they have a different markup. If the trade markup is changed for a certain group of goods in the reporting period, then the calculation for it is made separately for each period.

By the remainder of goods

This method of calculation is practically not used, but at the same time, it is no less effective than any of the ones given here. Its rare use is due to the complexity in calculations and to save information, here it is necessary to obtain the sum of all markups for each sold product.

If the trade organization can track such information, then any other information necessary for settlements in another way will not be difficult to save, for example, you can make a calculation at purchase prices.

The values here will be the same as in the previous formula: VD = a + b - c - b

By turnover

This method is best used if the same percentage of the markup is set on all the items the organization sells. The turnover is understood as the amount of proceeds for all goods sold in a certain period, including VAT.

To determine the gross income by turnover, you need to know the following values:

Trade turnover (we will designate it as TO).
Estimated trade margin (РТН), calculated from the formula РТН = ТНО / (100% + ТНО).
Trade margin set by the organization (TNO).
And let's designate gross income as VD.

So, we get the following formula: VD = TO * PTH

If the trading margin changes during the reporting period, this method can still be applied, but it will be a little difficult, since you will have to calculate the gross income for each period of the new markup and then summarize the results.

Example of calculating gross profit

In the grocery store of Post Torg OJSC, the same markup of 20% is set for all goods. The proceeds in the reporting period amounted to 200,000 rubles including VAT. The estimated trade margin in this case will be equal based on the formula - 20% / (100% + 30%) = 0.15. This means that the gross profit will be 200,000 * 0.15 = 30,000 rubles.

Checking the calculation of gross profit

Once you have completed all your gross profit calculations, you can check them for correctness. To begin with, the gross profit is divided by the net profit, thus, the difference between the cost of the product and its selling price is obtained.

Further, this percentage must be compared with the trading margin, if these indicators hardly differ or do not differ at all, then you performed the calculations correctly, if there are large discrepancies, you need to make sure that the calculations are correct and look for an error. The error can be found anywhere - in the volume of sales, the purchase of inventory, other purchases and other expense items.

Gross profit is the total income a firm earns over a given period of time. It takes into account the income from all types of activities minus production costs. The amount of such profit must be reflected in the account. balance.

Gross profit differs from net profit in that it includes the cost of paying taxes and other mandatory payments.

Factors influencing gross profit

The amount of gross profit depends on several factors. They fall into two groups.

The first group includes factors that depend on the management segment:

Reducing the size of the cost of goods;
The indicator of the effectiveness of the sale of goods;
The rate of growth in the volume of production;
Carrying out activities aimed at improving the quality of goods;
Use of production capacity at maximum rates.

The second group includes external factors:

Location of the company;
Legislation under which the company operates;
The political and economic state of the state;
Natural and ecological indicators.

How to find gross profit

The calculation of gross profit must be carried out before taxes are calculated. The gross profit of the company is defined as the amount of additional profit. The calculation should be based on the type of company:

Trading firms. To calculate gross profit, you first need to calculate the amount of total net profit. To determine net revenue, all product returns and discounts provided must be subtracted from the total offset. Further, from the received amount of net profit, you need to subtract the cost of goods sold. The resulting difference will be the gross profit of the company.
Firms providing services. The gross profit of such firms is equal to the net proceeds. For the calculation, it is required to subtract the amount of discounts and refunds from the total gross income.

However, before you start calculating gross profit, you should pay attention to the following points:

Gross revenue. At the end of each working day, it is required to check that all information related to the receipt of money has been correctly reflected in the reports.
Collected sales tax. It is important to check that the reports correctly indicate the indicator that reflects the amount of tax collected. All collected funds must be included in gross income.
TMZ. This figure should be estimated at the beginning of this year. It must be compared with the size of the total profit for the past year. They must be the same.
Purchases. If, in the process of carrying out activities, the founders of the company acquire something for personal use, the amount of money spent should be excluded from the cost of the products sold.
TMZ at the end of the year. It is required to make sure that all the company's reserves are accounted for in compliance with the established requirements. It is imperative that you use the correct pricing methodology. An inventory list is sufficient to confirm the size of the inventory.

Checking the correctness of the calculations. If the company is engaged in wholesale or retail trade, it will not take much time to recount. All you need to do is divide your gross income by your net profit. The resulting value is expressed as a percentage. It reflects the difference between the cost of goods sold and its nominal price.
Add. sources of gross profit. If the firm receives income from sources that are not related to the main activity, such income must be added to the gross income. The addition results in gross income.

Gross Profit - Calculation Formula

VP = D - (S + Z), where:

VP - the size of the gross profit;
D is the number of manufactured goods sold (in value terms);
С - the cost of manufacturing goods;
З - production costs.

To carry out the calculation, it is required to subtract the cost of goods sold from the amount of revenue.

Gross Profit - Balance Formula

Balance sheet gross profit (p. 2100) is calculated as follows:

revenue (p. 2110) - cost of sales (p. 2120).

To carry out a competent calculation of the amount of gross profit, it is required to study in detail all cost items included in the cost of goods.

Gross profit is not revenue! Revenue represents the amount of funds that an enterprise owns its products or services.

While profit is the positive total of the difference between the amount of revenue and the expenses incurred. And understanding this difference between the indicators provides answers to many questions related to the efficiency of the enterprise.

Gross profit. What is this indicator?

The concept may differ depending on the sources of its definition, but the essence of this indicator remains unchanged.

So, for accounting purposes gross profit is recognized:

under the accrual method - all operations for the shipment of goods to customers (for services rendered or work performed), regardless of the receipt of payment for them and minus the main expenses incurred but not paid;
with the cash method - all cash receipts associated with the main (production) activity and reduced by the expenses paid by the enterprise. In this case, only the fact of making and receiving payment matters.

For profit analysis purposes its gross indicator is called marginal. It is calculated as the difference between net revenue (i.e., less) from the sale of goods (services, works) and all (!) Production costs (including sales costs) that fall on the volume of products (services) sold.

Gross revenue is calculated according to the accounting data, which reflects all the facts of the production activity of the enterprise. And those facts that are not directly related to the company's activities, but have found their place in its accounting process, form economic profit. This type of profit is dangerous to use for analysis purposes, because this category is calculated on the basis of all expenses, including those that did not even have anything to do with entrepreneurial activity (for example, the cost of treating the owner's children, paying his utility fees, etc. .). Economic profit is always less than accounting profit.

Therefore, for the purposes of analysis, the accounting indicators reflected in. Based on how competently this report is drawn up, the reliability of all subsequent calculations based on it depends.

Calculation rules

In accounting, gross profit is found very quickly - according to the turnover of account 90 "Sales" based on the data of its subaccounts.

Wherein in the composition of expenses that are used in determining gross margins include:

(services or goods) - these are all production costs;
indirect taxes, which are included in the revenue and are reimbursed by buyers upon the transaction (and excise taxes);
selling expenses are the costs of selling: packaging, delivery of products to customers, advertising campaigns, etc .;
management (general) costs are the costs of the enterprise for servicing operations that are associated with the management of the company, with the maintenance of its administrative facilities, and other similar costs.

It should be noted that selling and general expenses can be included in the aggregate indicator "Cost of sales" and reflected in the same subaccount as the production cost. But (approved by the Ministry of Finance of the Russian Federation in Order No. 94n of October 30, 00), it is possible to separately reflect administrative and sales costs - on separate sub-accounts of account 90. Everything depends on the company.

Besides, very important for the formation of the indicator gross profit is the fact of writing off general business (account 26) and commercial expenses (account 44):

with direct costing, administrative and sales costs can be fully included in the cost of goods sold (services rendered, work performed);
with the method of full costs, the specified costs are divided between the goods sold and those remaining in the warehouse of the enterprise.

In general calculation of gross profit (GP) according to account 90 it looks like this:

VP = Sub-account "Revenue" (including indirect taxes) - Sub-account "VAT" - Sub-account "Excise" - Sub-account "Cost of sales".

However, in the Statement of Financial Results, the gross profit indicator, which is indicated in the line of the same name, differs from the accounting data, although it is formed on their basis.

The fact is that in this Report gross profit is found as follows:

VP = Revenue (excluding indirect taxes) - Cost of sales.

At the same time, the cost of sales does not include any commercial or general business expenses. These expenses are already involved in calculating the financial result from sales, deducting from the gross profit indicator.

On examples the calculation of gross profit, taking into account the source of its determination, will look like this:

Revenue without VAT and excise taxes = 250 thousand rubles;
Cost of sales = 84 thousand rubles;
Selling expenses (KR) = 5 thousand rubles;
Administrative expenses (SD) = 6 thousand rubles.

With the direct costing method of writing off expenses:

VP = 250 tons - 84 tons - 5 tons - 6 tons = 155 thousand rubles;

To determine the gross profit using the full cost method, the example should be supplemented with the volume of sold and unsold products: 100 units. and 25 units. respectively. Then:

KR = 5 thousand x 100 units. / (100 units + 25 units) = 4 thousand rubles - should be attributed to the cost of sold 100 units. products;
SD = 6 thousand x 100 units. / (100 units + 25 units) = 4.8 thousand rubles - included in the cost of sold 100 units. products;
VP = 250 thousand - 84 thousand - 4 thousand - 4.8 thousand = 157.2 thousand rubles.

Thus, it can be seen how beneficial the direct costing method of writing off costs is for calculating accounting (when calculating the rest of taxes on income, this method of costing is not important).

If you calculate gross profit based on the data reflected in Statement of financial results then it will look like this:

VP = 250 thousand - 84 thousand = 166 thousand rubles - administrative and commercial expenses are not included in the calculation.

They are used to form another indicator - “Profit (loss) from sales”.

However, it is on the basis of the Statement of Financial Results that the analysis of indicators that affect the gross profit is carried out.

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Analysis of the obtained results

By the amount of gross profit have an impact three main factors:

the amount of revenue;
the amount of indirect taxes included in the proceeds;
cost of sales.

In turn, for each of the above factors are also influenced by many other indicators, in particular:

for revenue - prices, sales volume, demand for products, timeliness of payments for them, etc.
by the amount of indirect taxes - rates, changes in tax legislation, the structure of sales, the availability of benefits (for example, a company may be exempt from VAT), and much more;
on prime cost - the cost of materials, fuel and raw materials; wages of basic workers and the amount of insurance premiums charged on it, etc.

But for the purposes of factor analysis other indicators are taken:

sales volume (VRP) ... Its increase can lead to an increase in profits if most of the products sold are profitable goods (that is, those for which there is demand and which are capable of making a profit). If the products sold are unprofitable, then even an increase in their sales leads to a decrease in profits;
product structure (UD) ... The profit depends on the growth of the share in the total sales volume. The larger it is, the higher the amount of profit;
price (C) and cost (C) ... The lower the share of the cost price in the price, the higher the amount of profit.

To carry out factor analysis to identify the degree of influence of the above indicators, the following is used formula:

Profit = ∑ (VPGeneral x UD x (C - C)).

In this formula, all four indicators are first taken for the base period, and gradually, one by one, are replaced by the indicator of the reporting period, thus showing the degree of influence of each of them on the final result - on profit.

The base period for analysis is the elapsed time period, for which a month, quarter, etc. can be taken.

It is also worth noting that data on all four indicators can be taken from accounting - on account 90, according to which accounting is formed both quantitative and cost, moreover, for each type of product (service) separately.

The rules for constructing a report on gross profit in the 1C program are set out in the following video tutorial:

Every domestic enterprise carrying out economic activities, from time to time, needs to make calculations of indicators characterizing the effectiveness of doing business. One of these values is gross profit, the calculation formula for which is given below.

Gross profit

The main goal of the creation and operation of Russian enterprises is to make a profit.

At the same time, each organization is obliged to maintain accounting records of transactions that take place in the economic activity of the relevant entity.

The Ministry of Finance of the Russian Federation, by Order of 06.07.1999 N 43n, approved PBU 4/99, according to which the reporting of organizations consists of the following documents:

balance according to the form developed at the legislative level;
Profits and Losses Report;
annexes and explanatory note;
the auditor's opinion, but only in the cases listed in the legislation.

The official forms of the balance sheet and the statement of financial results were put into circulation by Order of the Ministry of Finance of the Russian Federation dated 02.07.2010 N 66n.

In the same act of lawmaking, the Ministry provided for an indication of the value of gross profit, the calculation formula for which is given below.

The importance of calculating the described variable cannot be overestimated due to the participation of the named value in the calculation of other indicators of the enterprise's activity.

Appendix No. 4 to the Order of the Ministry of Finance of the Russian Federation dated 02.07.2010 No. 66n to reflect the value of gross profit in the financial statements is line 2100.

How gross margin is calculated

It is important to remember that the value of gross profit is not identical to the income reflected in line 2400 in the financial statements.

In general terms, the calculation of the described variable is the difference between the revenue received by the organization from the sale and the amounts of the cost of the goods or services sold.

Accordingly, in order to answer the question of how to find gross profit, you must have the following data:

revenue on line 2110;
the cost recorded in section 2120.

Thus, to find the described value, you must apply the formula: p. 2100 = p. 2110 - p. 2120.

When calculating gross profit, you need to take into account the indicators that add up both revenue and the cost of goods.

If the company is a trading company, then the cost of production will consist of:

the cost of purchasing goods;
shipping cost;
paid wages and related taxes and contributions;
costs of renting retail space;
advertising costs;
other expenses.

A slightly different composition of costs in the manufacture of goods:

costs of materials, raw materials, means of production;
payroll fund, taxes, contributions;
costs associated with the organization of work;
depreciation of fixed assets;
storage costs;
other costs.

In a similar manner, the formation of the proceeds of a trading and manufacturing enterprise is distinguished.

It is important to remember that the list of items involved in calculating receipts or costs and, as a consequence, in determining gross profit, is not exhaustive. Each company presents a unique system that requires an individual approach when determining balance sheet indicators.

In conclusion, it should be noted that the value of the gross profit of the enterprise is reflected in Russian rubles. Other currencies are not allowed.

Gross profit is an indicator of the profitability of an enterprise. The indicator is calculated as the difference between revenue and cost. There is no standard, the higher the value, the greater the profitability of the company.

The efficiency of any commercial activity determines the size of its profit or the difference between income and expenses. This indicator cannot be negative, otherwise it is called a loss. Depending on the composition of costs and the specifics of calculations, profit can be economic, accounting, balance sheet, gross, net, operating, marginal, target, lost, normal, consolidating, etc. In total, there are more than 20 types of profit.

Determination of gross profit

Gross profit (EBIT, VP) is the difference between revenue and the cost of a product / work / service. Expressed in monetary terms.

In simple words: this is the profit received from the sale of goods / services, excluding some types of costs (taxes, excise taxes) that are not related to the costs of manufacturing and selling goods / services.

You can learn about the features of calculating gross profit from the video:

Calculation formula

To calculate the VP, it is customary to use the following formula:

VP = B - C, where:

B - revenue;
С - prime cost, taking into account depreciation charges.

For trade organizations, the option is more suitable:

VP = VD - C, where:

VD is gross income.

Revenue - funds received for the sale of a service / work / product. This is the amount that the buyer leaves in the store and thereby pays the cost of the product itself, the costs of pre-sale preparation, the amount of taxes (VAT, excise taxes), service. Revenue includes only those receipts that have arisen as a result of the main activity. It is the cash flow that flows through the organization.

Gross income is the amount of proceeds from the sale of goods / services, fixed assets, shares, intangible assets, intellectual property rights, calculated by the formula:

VD = (T x SPN) / 100, where:

T - turnover;
SPN is the average percentage of the markup.

Reference! The main difference between gross income and revenue is that gross income includes turnover from other activities.

Cost - the cost of production and sales costs. It includes:

The amounts spent on the purchase of raw materials and materials for the manufacture of products, or the cost of purchasing goods for further resale.
Depreciation of fixed assets.
Remuneration and social security payments to employees directly and indirectly involved in the production / resale process.
Advertising and marketing expenses.

The cost does not include administrative and selling expenses.

Reference! Depreciation of fixed assets - the gradual write-off of the cost of the purchase of fixed assets (buildings, structures, equipment, patents, etc.) in subsequent periods after the acquisition. In other words, if a company bought a machine for 10 million rubles, then it does not reflect the entire cost in the balance sheet, otherwise there will be a loss, but writes off the purchase amount over several years in small shares.

Economic meaning

EBIT is an important indicator of the financial and economic performance of any enterprise. All other types of profits, including net profit, are already considered on the basis of the IP.

What determines the size of the VP

The size of the airspace is influenced by external and internal factors. The scope and specificity of the company's activities, its location, size of the enterprise, audience coverage, and product demand are of decisive importance.

Internal factors depend on actions taken by the organization itself, external factors - on other independent parties to the market economy. All of them affect the cost price and sales volumes.

Unsold goods occupy a special place. They are in warehouses and cause losses. They can be unsold for various reasons: a drop in demand, there was a large supply, the human factor (they were not put up for sale), seasonality, a change in fashion trends. To sell such products faster, they use marketing tricks: they assign discounts, arrange promotions. You can return the goods to the supplier if they were taken for sale.

VP distribution

VP includes all expenses that are associated with the main activities of the company. Therefore, the funds received from the sale of products / services must be properly distributed in order not to miss a single item of expenditure.

Costs covered by EaP:

Rent of space.
Interest on liabilities (loans, borrowings).
Payment of taxes (income tax).
Other compulsory expenses.

In the final balance, the net profit is obtained, from which the income of the enterprise is formed. It is already directed to reserve funds, for personnel training, expansion, diversification, and development of the company.

Calculation example

For analysis, use the balance sheet data for the year, quarter or month. You can download an example calculation in Excel.

Table 2. VP in dynamics, thousand rubles.

			Cost price		Gross profit		Gross profit 2017 to 2016
							Deviation








September

The table shows that the GP indicator for each month of 2017 is higher than it was in 2016. This means that the company is doing better, despite the seasonal drawdown from March to June. The growth for the year amounted to 253 600 thousand rubles. or 132.8%.

Important! When calculating revenue and cost, one should keep in mind the real inflation rate, since it directly affects the rise in prices.

Value standard

EBIT does not have any normative value, since the higher the gross profit, the better for the company. It is necessary to compare the value of the indicator in dynamics and as a percentage of costs and net profit.