Are revenue and turnover the same? Understanding the company's financial performance. In simple words about revenue, income and profit What is profit in simple words in trading

The activities of a commercial organization can be characterized by its revenue and sales. What is their specificity?

What is business revenue?

Under the revenue of a commercial enterprise, it is customary to understand the amount (or a list of property in value terms) that it received as a result of sales or services within a certain period of time. Based on the difference between revenue and expenses (and sometimes only on the basis of the value of the first indicator), the amount of taxes that the company must pay to the state is determined. An exception is the taxation mechanism, in which the corresponding cash receipts to the company's account are not taken into account: such schemes should include, for example, the UTII system provided for by Russian legislation.

It should be noted that in accordance with some methods of financial analysis, revenue as an economically significant indicator may be reduced by taxes (in this case, it is referred to as “net revenue”).

There is a widespread approach according to which revenue is classified:

for cash receipts from the main type of commercial activity of the company;
on proceeds from investments (for example, in the form of proceeds from the sale of securities);
on revenue resulting from changes in exchange rates (for example, when exporting goods).

All three types of receipts are pooled into total revenue. But, as a rule, the efficiency of a business is assessed on the basis of those incomes that are associated with the main activities of the enterprise.

The company's revenue can be calculated by two methods: cash and accrual. In the first case, it is recorded upon receipt by the enterprise of funds to the current account or to the cash desk. In the second, it is calculated when a buyer of a product or a consumer of services has obligations confirmed by an agreement or law related to payment for the delivered products or services.

The main condition for obtaining revenue from core activities, regardless of the specific method of calculating it, is the sale of goods or services. Let's consider its specifics in more detail.

What is the implementation?

This term corresponds to the line of business of a commercial enterprise, which is associated with the supply of goods or services produced or resold by it to the market. In fact, we are talking about meeting the demand generated by consumers. At the same time, the interaction between them and suppliers within the framework of the implementation may imply not only the actual purchase and sale of goods or services, but also, for example, the organization of their delivery (providing conditions for the provision, when it comes to services), storage, promotion through available channels sales, etc.

The end result of the sale of a product or service is the receipt by an authorized person of payment for the delivered deliveries, which, in fact, forms the revenue for the main type of activity (or, if we are talking about the cash method of fixing income, this will be the acceptance by the buyer of obligations to pay for the product or service) ...

It can be noted that, in accordance with the legislation of the Russian Federation, they cannot be recognized as implementation, in particular:

operations related to currency circulation;
transfer of the firm's resources to its successors as part of the reorganization of an economic entity;
transfer of the firm's resources to the NPO for the implementation of activities that are not commercial;
transfer of investment property under a partnership agreement, as well as into mutual funds established in cooperatives;
transfer of property within the framework of concession legal relations;
transfer of the resources of a business entity to one of the participants upon leaving the business;
transfer of apartments to citizens within the framework of privatization;
operations of seizure of property, handling of ownerless things.

Comparison

There is more than one difference between sales proceeds. This is due to the fact that these terms, although they are used, as a rule, in the same context, nevertheless mean different things.

Revenue- This is the cash flow received by the organization as a result of the implementation of commercial activities. At the same time, it is not always associated with sales. The proceeds, as we noted at the beginning of the article, can be, in particular, investment.

Implementation- This is the part of commercial activity that is most significant from the point of view of the firm's acquisition of proceeds from the main type of business. It is almost always associated with the sale of goods and services.

Having determined what the difference between revenue and sales is fundamentally, we will reflect the conclusions in a small table.

Hello! In this article we will talk about related, but not identical, concepts: revenue, income, and profit.

Today you will learn:

What is included in the company's revenue;
From what the income and profit of the company are formed;
What are the main differences between these concepts.

What is revenue

Revenue - earnings from the direct activities of the company (from the sale of products or services). The concept of revenue is found exclusively in business and entrepreneurship.

Revenue characterizes the overall performance of the enterprise. It is revenue, not income, that is reflected in accounting.

There are several ways of accounting for revenue in an enterprise.

The cash basis method defines revenue as real money received by the seller for the provision of services or the sale of goods. That is, when providing an installment plan, the entrepreneur will receive revenue only after the actual payment.
Another way of accounting is accrual. Revenue from it is recognized at the time of signing the contract or receiving the goods by the buyer, even if the actual payment occurs later. At the same time, advance payments are not related to such revenue.

Revenue types

Revenue in an organization is:

Gross- the total payment received for the work (or product).
Net- applied in. Indirect taxes (), duties and so on are deducted from gross revenue.

The total revenue of the enterprise consists of:

Revenues from core activities;
Investment proceeds (sale of securities);
Financial revenue.

What is income

The definition of the word "income" is not at all identical with the term "revenue", as some entrepreneurs mistakenly believe.

Income - the sum of all money earned by the company through its activities. This is an increase in the economic benefit of the enterprise by increasing the company's capital by the receipt of assets.

A detailed interpretation of the ways of generating income and their classification are contained in the Regulation on accounting "Income of organizations".

If cash proceeds are funds that enter the company's budget in the course of its core activities, then income also includes other sources of funds arrival (sale of shares, receiving interest on a deposit, and so on).

In practice, enterprises often carry out a variety of activities and, accordingly, have different channels for generating income.

Income - the general benefit of the company, the result of its work. This is the amount that increases the capital of the organization.

Sometimes the income is equal to the amount of the net revenue of the organization, but most often companies have several types of income, and there can be only one revenue.

Income is found not only in entrepreneurship, but also in the daily life of a private person who is not engaged in business. For example: scholarship, pension, salary.

Receiving funds outside the scope of business activities will be referred to as income.

The main differences between revenue and income are given in the table:

Revenue	Income
The result of the main activity	The result of both main and auxiliary activities (sale of shares, interest on a bank deposit)
Occurs only as a result of doing business	Allowed even for unemployed citizens (benefits, scholarships)
Calculated from the funds received as a result of the work of the company	Equal to revenue minus expenses
Cannot be less than zero	Let's admit going into a negative value

What is profit

Profit is the difference between total income and total expenses (including taxes). That is, this is the same amount that in everyday life could be safely put into a piggy bank.

In an unfavorable scenario and even with a large income, the profit may be zero, or even go into negative territory.

The main profit of the company is formed from the profit and loss received from all areas of work.

The science of economics identifies several main sources of profit:

The pioneering work of the company;
An entrepreneur's skills to orientate in the economic situation;
Application and capital in production;
The monopoly of the company in the market.

Profit types

Profit is divided into categories:

Accounting... It is used in accounting. On its basis, accounting reports are formed, taxes are calculated. Obvious, reasonable costs are deducted from total revenue to determine accounting profit.
Economic (excess profit)... A more objective indicator of profit, since when calculating it, all economic costs allowed in the work process are taken into account.
Arithmetic... Gross income minus miscellaneous costs.
Normal... Necessary income for the work of the company. Its value depends on the lost profit.
Economic... Equal to the sum of normal and economic profit. Based on it, decisions are made on the use of the profit received by the enterprise. Similar to accounting, but calculated differently.

Gross and net profit

There is also a division of profit into gross and net profit. In the first case, only the costs associated with the workflow are taken into account, in the second - all possible costs.

For example, the formula used to calculate the gross profit in trade is the selling price of a product minus its cost.

Gross profit is most often determined separately for each type of activity, if the company operates in several directions.

The gross profit is applied when analyzing the areas of work (the share of profit from which activity is greater), when the bank determines the company's creditworthiness.

Gross profit, from which all costs (credit interest, and so on) are subtracted, forms a net profit. It is charged to shareholders and owners of the enterprise. And it is the net profit that is reflected in and is the main indicator of the work of the business.

EBIT and EBITDA

Sometimes, instead of the understandable word “profit,” entrepreneurs come across cryptic abbreviations such as EBIT or EBITDA. They are used to assess the performance of a business when the compared objects operate in different countries or are subject to different taxes. Otherwise, these indicators are also called cleared profit.

EBIT represents profit as it was before taxes and various interest. It was decided to separate such an indicator into a separate category, since it is located somewhere between gross and net profit.

EBITDA- this is nothing more than profit without tax, interest and depreciation. It is used exclusively for evaluating a business and its characteristics. It is not used in domestic accounting. for trade equipment.

Thus, income is the funds received by the entrepreneur, which he can spend in the future at his own discretion. Profit - the balance of funds minus all expenses.

Both income and profit can be predicted if we take into account the revenue for previous periods of work, fixed and variable costs.

The differences between profit and revenue are as follows:

The line between the concepts may not be clear for an ordinary employee, it does not matter to him how the revenue differs from profit, but for an accountant there is still a difference.

Some inexperienced entrepreneurs, as well as a lot of other categories of people remote from the subject of business, do not understand at all how revenue and profit differ, but the difference between them is very significant.

In this regard, many rather naive citizens incorrectly assess the potential successes of their activity, expect unrealistic results and incomes from entrepreneurial activity.

All of this can lead to significant disappointment, an incorrectly drawn up business plan, and in some cases even bankruptcy. That is why it is important to be able to calculate how profit is obtained and not to confuse it with other concepts.

Before starting an active commercial activity, it is imperative to understand a little about how the economy works, to consider the basic concepts set forth even in simple terms.

The concepts of revenue and profit are not the same thing, so this issue should be well studied and not be an amateur in it.

What is the difference between revenue and profit

The considered concepts overlap with each other quite strongly, but they are not identical. Even large corporations can have a huge turnover of goods and billions of dollars in revenue, and at the same time there is a very real danger of being bankrupt.

There are a lot of different economic terms in trade, which are often even manipulated, leading people to misunderstanding and inability to understand the real economic situation. But if for an ordinary citizen this is still excusable and not dangerous, for a businessman ignorance is unacceptable.

The profitability of any business is described by the amount of profit that it gives - the difference between the total revenue received by the company and the costs that have to be made to obtain it.

Simply put, profit is the total income of the company minus all necessary expenses (purchases of goods and materials, payment of taxes, salaries, etc.).

Revenue is defined as the sum of all income that the company receives after the sale of goods and services, excluding any costs and expenses.

As you can see from these concepts, the difference between them is really very significant. Every businessman seeks to increase not so much revenue, but net profit, because it is for the sake of it that the whole business is brewed.

It is important to understand: the ultimate performance of any business always depends on its profitability.

What does the firm's profit consist of?

Profit is not as simple a phenomenon as it might seem at first glance.

This definition includes such basic components as:

net profit;
gross;
balance sheet;
margin.

All varieties of the term have their own distinctive characteristics, and usually accounting practice considers them separately.

Profit is the ultimate goal of any institution, unless it is a government organization. It consists of all financial and, possibly, non-financial, and other material receipts that have become the property of the company.

To get a specific number of a given value, it is necessary to deduct the perfect costs from all revenues to the company's budget: for raw materials and materials, salaries, taxes, fuel for transport, interest payments on loans, etc.

The resulting amount ultimately equals the firm's net profit.

What is sales profit

This concept denotes the amount of money received from the sale of the company's goods.

To estimate this value, you need to know the following data:

What product will be sold, its features and popularity in the market.
The cost of goods sold, specifically the one at which goods will be sold in a given firm.
Also, sales profit is calculated taking into account the volume of successfully sold goods.

To assess how much money the company will receive even before the sale of the entire planned volume of production, such an economic unit as profitability is taken into account. To do this, it can be useful to study the data of past periods of activity and carry out the calculation using the following formula:

Profit from sales = volumes of goods sold * average price * profitability of the past trading period

To assess the parameter under consideration even more accurately, you can use a lot of existing analysis methods and financial programs.

Its useful to note: there is also a nominal profit - it does not take into account the rise in prices and inflation, as well as a number of other rather significant parameters.

What is gross margin

This concept, in a sense, shows the success of trading, as it denotes the difference between the proceeds received from the sale of goods and its cost - the means spent on production, packaging and delivery to the final consumer.

Gross profit and operating profit should not seem to be the same thing - in the latter case, the full range of taxes, penalties, all kinds of interest on loan obligations and fines are not taken into account.

As for the cost, it can be considered in completely different ways, for example, when it comes to trade and full-fledged production.

To determine the cost of goods from the factory, you need to take into account the costs of raw materials, raw materials, lighting and heat required for the actual production of the goods.

Consider: if an employee receives a certain amount for each unit of goods, his salary is also included in the cost of the product.

What is net profit

Only when the gross margin is estimated is net profit.

The general method for calculating it looks like this: the gross income, which was discussed in the previous paragraph, is taken, and all so-called operating expenses, as well as taxes, are deducted from it.

Operating expenses include the following expenses:

payment of transport services;
payment of rent of premises;
the issuance of wages to the labor collective, etc.

In terms of taxes, you need to deduct various interest on loans, fines and penalties, directly government taxes and other similar things.

When all these costs are accounted for and calculated, then the positive difference between gross profit and them will be net profit.

Revenue types

What, in turn, are the types of revenue? There is some classification here, but it depends more on the type of activity of a particular person.

The following types are distinguished separately:

Income from the main activity of a company or an individual entrepreneur received as a result of the sale of goods, the provision of services, the performance of any work.
The proceeds from investments made is another matter. This can be the sale of securities, fixed assets, and so on.
There is also revenue from financial activities.

If desired, an individual can also use the concept of annual revenue to indicate the amount of funds received over a certain period.

The total revenue is the sum for all the specified areas and most accurately characterizes the activities of the company.

Sales revenue - what is it

Revenue from the sale of a good or service is the ordinary income from the sale of it.

The receipt of such revenue is very clear and its assessment should not cause any difficulties at all.

The cost of goods always appears in any transaction or contract, so it is not difficult to calculate the parameter in question.

Sales revenue (B) is equal to:

B = quantity of goods sold * its value

The average price may appear here, but the result of the assessment will be approximate, which in some cases is quite acceptable.

As a conclusion, it should be noted that entrepreneurial activity is a rather interesting, but at the same time, complex process that must be constantly monitored and evaluated.

The profit required by every business should not get confused in the understanding of people with ordinary revenue. It consists of many of the factors discussed above, and the maximum performance of a business is assessed precisely by its size.

The terms revenue and profit are considered by many to be equivalent, but the difference between them is significant. Biznes.ru explains how profit differs from revenue and why it is important not to confuse one with the other.

Financial parameters: profit and revenue

The commonality of the terms is that revenue and profit are indicators that characterize the material condition of the company. However, their meaning is different and they occupy different positions in the structure of the results of economic activity.

The fundamental difference between profit and revenue is the reflection of economic benefits:

revenue shows the volume of sales;

profit accumulates the overall financial result of the company's operation from all sources of income minus full costs;

a high revenue figure does not mean a high profitability of the business.

Correct display of profit and revenue is an important point in maintaining a company's accounting. If you do not have time to understand the intricacies of financial document flow, entrust it to professionals at outsourcing. The specialists of the Chief Accountant Assistant will free you from the need to prepare papers, calculate profits and report to the tax office.

Revenue generation

The purpose of the indicator is determined from the name itself. The parameter consists of the proceeds from the provision of services, the performance of work, the sale of goods for the activities prescribed in the charter as the main one. Other receipts are classified as income.

What are the criteria by which the proceeds and profits of the enterprise are recognized in the accounting, is regulated by the Accounting Regulations PBU 9/99 (Order of the Ministry of Finance of the Russian Federation No. 32n). Revenue is considered recognized if:

the company has a documented right to the proceeds, and the rights to the product itself are transferred to the counterparty (the service is provided);

you can determine the amount to be received and the costs of operations;

the economic benefit of the company increases - the company receives an asset (money, property) or is confident in its receipt.

The proceeds from the main activity are formed from the volume of sales and accounts receivable. Gross revenue is receipts from the sale of goods or services, including taxes payable (VAT, excise taxes). After holding them, net revenue is formed - a parameter that is necessary to determine profit and profitability.

Some entrepreneurs mistakenly believe that the proceeds and profits from sales are calculated as receipts to the current account and to the cashier. In fact, for the shipped goods, services rendered, funds can be received in parts, on the terms of a deferred payment. In this case, the resulting receivables are also included in revenue for accounting purposes. Entities using the simplified accounting scheme are allowed to recognize revenue on the basis of financial receipts if title to the goods has not passed to the counterparty.

Regardless of the applied accounting scheme, simplified or standard, it is better for a qualified specialist to deal with the documents in the company. This will avoid confusion arising from errors in reporting profits. We advise you to pay attention to the Glavbuh Assistant service: with its help it is easy to see the benefits of outsourcing accounting. It is convenient, reliable and economical.

The indicator is calculated for the company as a whole and by type of activity: main, financial and investment. According to clause 18.1 of PBU 9/99, revenue over 5% of all income is shown separately by type. The accounting is carried out on the credit account 90 "Sales" on the corresponding subaccount. It is important that the indicator of proceeds cannot be negative - this is another criterion for the difference between profit and revenue.

On our portal there is additional material, according to which mathematical expressions the revenue is calculated. Examples with specific numbers will help you independently cope with the definition of this financial parameter: "Revenue - formulas and application".

Determination of profit, types

Unlike the proceeds from the sale of funds, profit is not income received from activities, but an increase, an increase in the company's capital. Sales profit is the difference between the sales proceeds and the cost of creating a product. The balance can be positive or negative, in rare cases, in the absence of costs, coincide with the amount of revenue.

The parameter "profit" has many meanings, more often in small business they operate with the following terms:

Gross - the cost of the workflow is included in the calculation. If a company operates in several areas, gross profit is determined by type of activity. The parameter is used to analyze the economic efficiency (profitability) of general activities and in the context of areas;

Net or balance sheet - all other costs, taxes, fines, interest on loans, etc. are taken into account. This is the financial result of the reporting period according to accounting data.

The result of activity, positive (profit) or negative (loss) for the reporting period, is reflected in account 90 on the subaccount “Profit / loss from sales”. The financial result for the year is summarized on account 99 “Profits and losses”.

How to correctly reflect the indicator in official reporting? Biznes.ru prepared to help the entrepreneur.

Revenue and profit of the company: the use of terms

Let's summarize the comparison of economic parameters: profit and revenue, what is the difference?

Even if you are not going to engage in accounting and tax calculation on your own, understanding the essence of these criteria is necessary for competent communication with tax authorities, partners, as well as for assessing profitability and business success. So, as stated, a large amount of proceeds from sales does not equate to commercial success. At the same time, entrepreneurs usually seek to reduce the profit indicator in order to reduce the tax burden and increase revenue as a positive characteristic of the company's image and importance in the eyes of partners.

Many people think that "profit" and "revenue" are the same thing. However, there are many differences between the two financial concepts. Both "profit" and "revenue" are financial and business terms. Their meanings are close to each other because they are often used in the same context. Both of these terms are used in accounting and economic disciplines.

Revenue is the total amount of money that a business receives as a result of its activities, such as the sale of a product or service, but can also be obtained indirectly. A business can get indirect income by investing money in something.

Profit

On the other hand, profit or net profit is money that remains in the business after deducting all costs and expenses from the proceeds. Legal costs and expenses include operating costs (wages, equipment maintenance, safety, raw material costs, and many others), depreciation and capital. Costs can be categorized into different types (usually in tandem) and include fixed and variable costs, direct and indirect costs, etc. Profits can be classified as positive or negative (plus or minus).

The difference between revenue and profit

For the average employee, profit and revenue are the same thing. If an employee received a salary, this is his profit and revenue, because all taxes and pension payments are automatically deducted from the employees' wages, so what the employee receives in his hands is the remainder after all deductions.

They are also calculated in different ways. Profit is calculated by subtracting costs and expenses from total revenue. Revenue is calculated by multiplying the price by the number of units sold.

In economics, profit and revenue have a broader understanding. The economy looks at the profit and income of an entire industry or an entire country. This perspective allows a country or industry to assess growth or decline.

basic information

"Profit" and "revenue" are concepts used in business, finance and economics, it is money or its equivalent received by an economic entity (business, company or government) or an individual (employees).
Both concepts are used for different levels: personal, business and national. Accounting generally uses personal and business level to calculate profit and revenues. The economy counts nationally or globally.
“Revenue” is generated after a business produces and sells goods and services. Revenue is calculated by multiplying the price by the number of units sold. Profit is calculated after all deductions and calculation of expenses.
Profit and revenue are constantly involved in the production cycle. “Revenue” is the starting point for profit, and profit provides cash for the next cycle of production and increase in revenue.

Income - cash or material values received by the company as a result of economic activity (production and sale of goods and services) for a certain period of time.

Firm income- an increase in economic benefits as a result of the receipt of assets (cash, other property) and (or) the repayment of liabilities, leading to an increase in the capital of this organization, with the exception of contributions from participants (property owners). Income from ordinary activities is proceeds from the sale of goods and services.

There are 3 forms of enterprise cash income:

wages as an employee's income;

profit- as an entrepreneur's income;

percent as income on money capital (borrowed or extended credit).

Each of these forms of income rewards the productive efforts of the relevant economic entity, ensures the reproduction of the system of economic needs and interests, and also together they act as a material source in a market economy, an incentive for the effective use of the ability to work, means of production (fixed capital), money capital ...

Income there is a monetary assessment of the results of the firm (or an individual individual) in the form of a sum of money coming into its direct disposal. Income reflects the economic performance of the business of the firm and is the main source of financial resources. A firm's income consists of two parts:

from proceeds from the sale of products (goods or services). It represents a certain amount of money from the main activities of the company, the end result of which is the manufactured and sold products or services rendered (work performed) paid by the buyer or customer;

from non-operating income , which are side financial receipts of the firm. They are not directly related to the main production activity. Their sources are: dividends on invested shares or purchased shares and other securities; fines received from counterparties; penalties, penalties, interest for keeping funds in a bank and other income.

Distinguish general,average and ultimate income.

Total (total, or gross) income - This is the aggregate amount of money received from the sale of a certain amount of goods. It is determined by multiplying the price of a product by the number of units sold.

Average income - This is the proceeds from the sale of a unit of production, that is, the gross income per unit of products sold. It acts as the unit price for the buyer and as unit income for the seller. Average income is equal to the quotient of total income divided by the number of products sold. At a constant price, the average income is equal to the selling price.

Marginal (additional) income - This is an additional income to the total income of the firm, received from the production and sale of an additional unit of goods. Marginal income is defined as the difference between the total income from the sale of n + 1 units of a product and the total income from the sale of n products.

The marginal income makes it possible to judge the efficiency of production, as it shows the change in income as a result of an increase in output and sales of products by an additional unit. It also allows you to assess the possibility of recoupment of each additional unit of output. In combination with the indicator of marginal costs, it serves as a cost guideline for the possibility and feasibility of expanding the volume of production of a given firm.

Considering the total, average, and marginal revenues of a firm does not tell us anything about the profits the firm is hoping for. Meanwhile, any company not only counts on making a profit, but also seeks it maximize... But profit maximization is not based on the principle “the more output, the more profit”. In order to get the maximum profit, the firm must produce and sell optimal production volume.

Profit - the positive difference between the total income (which includes the proceeds from the sale of goods and services, received fines and compensations, interest income, etc.) and the costs of production or acquisition, storage, transportation, sale of goods and services.

The profit of any firm can be calculated based on two indicators:

1) total income (total revenue) received by the firm from the sale of its products;

2) total costs that the company carries in the process of manufacturing these products.

Profit = Income - Cost (in monetary terms).

By the volume of distribution costs, the following are distinguished:

accounting profit - the difference between the amount of income taken into account and what is considered expenses (current costs); then. it is equal to the total revenue minus external (explicit, actual) costs;

economic profit - a more informal indicator is the remainder of the total income after deducting all (including alternative) costs (external, internal and a normal entrepreneur's profit- the minimum wage for rewarding entrepreneurial functions as an element of internal costs along with internal rent and internal wages); the difference between accounting profit and additional costs, such as: uncompensated own costs of the entrepreneur, not taken into account in the cost price, sometimes even “lost profit”, the costs of “stimulating” officials in a corrupt environment, additional bonuses to employees, etc.

Also still counting gross (balance sheet, total) profit and clean profit - remaining after paying taxes and deductions from gross profit. Economic profit is also sometimes called clean , meaning by this income minus absolutely all costs.

Economic profit differs from the indicator of accounting profit in that when calculating it, the cost of using all long-term and other interest-bearing obligations is taken into account, and not only the cost of paying interest on borrowed funds, as is the case when calculating accounting profit. That is, accounting profit exceeds economic profit by the amount of opportunity costs or costs of rejected opportunities.

Economic profit makes it possible to compare the return on invested capital of an enterprise with the minimum profitability required to meet investors' expectations, and also to express the resulting difference in monetary units.

Economic profit serves as a criterion for the efficiency of resource use. Its positive value shows that the enterprise has earned more than is required to cover the cost of the resources used, therefore, additional value has been created for investors, founders. In the case of the opposite situation, this indicates that the organization was unable to cover the cost of using the attracted resources. Lack of economic profit can cause capital outflow from the enterprise; the option of leaving the enterprise from the market is also being considered.

The essence of profit is most fully manifested in its functions .

Accounting function of profit comp. in the fact that profit is the most important criterion for the efficiency of a firm's entrepreneurial activities.

Profit incentive function lies in the fact that profit is a powerful generator of the economy, because the increase in profit depends on the amount of products produced, the technical organization of production, the volume of sales, and the rate of capital turnover.

The essence distribution function of profit consists in the fact that it serves as a source of accumulation and development of production, a source of material incentives for workers. In a market economy, profit is the basis for the development of an entrepreneurial firm.

The amount of profit characterizes the success of doing business, making a profit is usually the main goal and driving motive of all types of entrepreneurship.

Profit is a source of financing for an enterprise, as well as a source of budgeting at various levels and a condition for the company to engage in charity work.

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

Costs - the cost of production and sales of products.

The profit indicator has 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 total cost of production;
profit from the sale of various property and material values;
profit from non-sale 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, it means that the result of economic activities are costs.

The marginal profit is obtained as a result of the sale of an additional copy of the product.

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

It is possible to effectively manage profits only when not only taking into account funds by increasing the total cost of sales with a stable level of costs, but the maximum amount of profit that can be achieved in the current environment.

It should be remembered that setting a low price can undermine the profitability of a product or service. It is recommended to practice reducing the 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 the product or service not to fall in price, it is recommended to offer customers simpler analogs. This move helps to keep the price distance and product attractiveness.

Profit types

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

Depending on distribution costs:

accounting- profit received as the difference between income from sales 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 obtained at minimum costs and maximum revenue;
lost(lost profits) or loss - income that is not received as a result of breaches of the obligation by the other party.

By the nature of taxation:

Taxable- profit that is taxable in accordance with the law is the difference between the total income from the sale of goods and non-sale transactions, excluding losses of the previous period.

Non-taxable profit- income received as a result of operations regulated by article 251 of the Tax Code of the Russian Federation.

What is income?

Revenue represents revenue received over a specified period from the sale of goods and services, excluding material costs. Taxes are also deducted from this amount in accordance with the law.

Material costs mean the amount spent on the production of products. Depreciation of fixed assets, social security contributions and other costs, excluding wages, are also equated to such costs.

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

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

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

Revenues are classified based on costs.

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

The resulting figure reflects the return on investment of the enterprise.

On its basis, in combination with marginal costs, the management decides on the rationality of the firm's expansion.

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

Total income is the result of the company's economic activities, calculated as the difference between the cost of the sold product or service and the total cost of production.

What is revenue?

Revenue - the total amount of funds 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 its 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-sale transactions and property;
net proceeds- funds received after deducting VAT, taxes, discounts and the cost of returned products from the gross proceeds. 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 profit and represents profit from which interest and taxes have not yet been deducted.

This profit is also called operating profit.

But it's not right. Unlike operating, EBIT also includes non-operating income. If EBIT does not include non-operating income and expenses, the indicator will be equal to operating profit.

EBIT profit is calculated according to the data of the "Statement of profit and loss": it is the sum of profit or loss before taxes and interest payable. Positive EBIT is considered normal.

EBITDA profit

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) depends on the depreciation method. It is the sum of earnings before interest, taxes and depreciation that shows the cash flow.

EBITDA is used to calculate the company's debt burden. To do this, the total liabilities (long-term and short-term debt) are divided by the nominal 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's the difference?"

Revenue, income and profit: what is what

It is difficult to assess the efficiency of an enterprise, the criteria are chosen differently in each case. But always, both in planning and in the analysis of current activities, financial indicators are used. Among the mandatory are revenue, income and net profit. These concepts are often confused.

Revenue

Revenue refers to funds received for products sold or services rendered. There are 2 ways to reflect revenue:

cash method;
accounting for accrual proceeds.

The cash method assumes that only money actually received is related to revenue. It shows how much the company is already managing. But the proceeds also include advances for which the company has not yet fulfilled its obligations.

In accrual accounting, revenue is recorded when the goods are shipped or the service is provided. In this case, the indicator shows the volume of sales, but does not take into account the fact that the buyer may turn out to be unfair and will not pay for the purchase.

From the point of view of accounting, the company's revenue is divided into 2 types:

gross;
clean.

Gross revenue - payment received for a sold product or service. Net revenue is gross revenue minus excise taxes, taxes, fees and duties, which are directly included in the price of the goods. It is reflected in the obligatory document - the income statement.

The indicator of revenue does not reflect the efficiency of the company, because the revenue is also the case for unprofitable enterprises, but it characterizes the company's share in the market. To calculate this share, you need to know the volume of sales in the industry for the reporting period.

Income

Income includes all receipts, not just those related to the core business of the company. This includes interest on deposits or levied fines and penalties.

If the revenue is strictly planned, then the income is unplanned, for example, if the partner violated the terms of the contract and paid a penalty.

Profit

Profit is a basic indicator for assessing the performance of an enterprise. It is she who is primarily interested in shareholders, because dividends are paid from the profit.

Gross and net

Allocate gross and net income.

Gross profit shows the overall performance of the enterprise. To calculate it, you need to deduct costs from income for a certain period. Banks and the state will also want their share of this "pie". Therefore, the shareholders of the company pay attention to the net profit.

Net income is what the company works for. It is not necessarily fully paid to shareholders. To calculate the net profit, compulsory payments are deducted from the gross profit:

taxes, fees and fines (that part of the "total" profit, which is due to the state);
interest payments (goes to financial institutions that issued a loan to the company).

The remaining money is called retained earnings. They are reinvested, that is, directed to the benefit of the company. It is an alternative to a bank loan or other external financing. How much money to give in the form of dividends, and how much to use for development, is decided by the meeting of shareholders.

If the amount of net profit is negative, it is called an uncovered loss. Until the profit covers the losses, the company does not pay income tax.

EBITDA and EBIT

There are 2 more profit indicators that are not indicated in the reporting, but are used in financial modeling, when evaluating projects, and are of interest to investors: EBIT - profit before interest and taxes, and EBITDA - profit before interest, taxes and depreciation.

EBITDA was originally invented to calculate whether a firm can pay off its debts. This parameter, together with the net profit indicator, reflects the amount of payments that the firm will make in the forward period.

It illustrates the income that the company receives in the current period. It is easy to carry over to future periods, so it is used to assess ROI and self-financing opportunities.

EBITDA allows companies to be compared regardless of their type and accounting policies. The comparison is not influenced by the size of investments, lending burden and taxation regime.

The main disadvantage of the EBITDA parameter is that it does not take into account that the company will need money to replace equipment due to depreciation. Enterprises that have a large share of their costs spent on amortization (heavy industry, extraction of natural raw materials, construction) try to demonstrate this parameter more often, because this way their projected profit is more attractive to investors. Therefore, investors consider EBITDA together with EBIT.

Another disadvantage of EBITDA and EBIT is that the calculation takes into account not only the results of core activities, but also one-time receipts. This makes it difficult to analyze the company. To get rid of such "information noise", other income is deducted in the calculations or an indicator of operating profit is used. This is how the firm's ability to generate cash flow is predicted. But the problem is that these additional operations can cause financial manipulation, and the indicators will eventually turn out to be overestimated or underestimated.

Hello! In this article we will talk about related, but not identical, concepts: revenue, income, and profit.

Today you will learn:

What is included in the company's revenue;
From what the income and profit of the company are formed;
What are the main differences between these concepts.

What is revenue

Revenue - earnings from the direct activities of the company (from the sale of products or services). The concept of revenue is found exclusively in business and entrepreneurship.

Revenue characterizes the overall performance of the enterprise. It is revenue, not income, that is reflected in accounting.

There are several ways of accounting for revenue in an enterprise.

The cash basis method defines revenue as real money received by the seller for the provision of services or the sale of goods. That is, when providing an installment plan, the entrepreneur will receive revenue only after the actual payment.
Another way of accounting is accrual. Revenue from it is recognized at the time of signing the contract or receiving the goods by the buyer, even if the actual payment occurs later. At the same time, advance payments are not related to such revenue.

Revenue types

Revenue in an organization is:

Gross- the total payment received for the work (or product).
Net- applied in. Indirect taxes (), duties and so on are deducted from gross revenue.

The total revenue of the enterprise consists of:

Revenues from core activities;
Investment proceeds (sale of securities);
Financial revenue.

What is income

The definition of the word "income" is not at all identical with the term "revenue", as some entrepreneurs mistakenly believe.

Income - the sum of all money earned by the company through its activities. This is an increase in the economic benefit of the enterprise by increasing the company's capital by the receipt of assets.

A detailed interpretation of the ways of generating income and their classification are contained in the Regulation on accounting "Income of organizations".

In practice, enterprises often carry out a variety of activities and, accordingly, have different channels for generating income.

Income - the general benefit of the company, the result of its work. This is the amount that increases the capital of the organization.

Sometimes the income is equal to the amount of the net revenue of the organization, but most often companies have several types of income, and there can be only one revenue.

Income is found not only in entrepreneurship, but also in the daily life of a private person who is not engaged in business. For example: scholarship, pension, salary.

Receiving funds outside the scope of business activities will be referred to as income.

The main differences between revenue and income are given in the table:

Revenue	Income
The result of the main activity	The result of both main and auxiliary activities (sale of shares, interest on a bank deposit)
Occurs only as a result of doing business	Allowed even for unemployed citizens (benefits, scholarships)
Calculated from the funds received as a result of the work of the company	Equal to revenue minus expenses
Cannot be less than zero	Let's admit going into a negative value

What is profit

Profit is the difference between total income and total expenses (including taxes). That is, this is the same amount that in everyday life could be safely put into a piggy bank.

In an unfavorable scenario and even with a large income, the profit may be zero, or even go into negative territory.

The main profit of the company is formed from the profit and loss received from all areas of work.

The science of economics identifies several main sources of profit:

The pioneering work of the company;
An entrepreneur's skills to orientate in the economic situation;
Application and capital in production;
The monopoly of the company in the market.

Profit types

Profit is divided into categories:

Accounting... It is used in accounting. On its basis, accounting reports are formed, taxes are calculated. Obvious, reasonable costs are deducted from total revenue to determine accounting profit.
Economic (excess profit)... A more objective indicator of profit, since when calculating it, all economic costs allowed in the work process are taken into account.
Arithmetic... Gross income minus miscellaneous costs.
Normal... Necessary income for the work of the company. Its value depends on the lost profit.
Economic... Equal to the sum of normal and economic profit. Based on it, decisions are made on the use of the profit received by the enterprise. Similar to accounting, but calculated differently.

Gross and net profit

There is also a division of profit into gross and net profit. In the first case, only the costs associated with the workflow are taken into account, in the second - all possible costs.

For example, the formula used to calculate the gross profit in trade is the selling price of a product minus its cost.

Gross profit is most often determined separately for each type of activity, if the company operates in several directions.

The gross profit is applied when analyzing the areas of work (the share of profit from which activity is greater), when the bank determines the company's creditworthiness.

Gross profit, from which all costs are subtracted (, credit interest, and so on), forms a net profit. It is charged to shareholders and owners of the enterprise. And it is the net profit that is reflected in and is the main indicator of the work of the business.

EBIT and EBITDA

Thus, income is the funds received by the entrepreneur, which he can spend in the future at his own discretion. Profit - the balance of funds minus all expenses.

Both income and profit can be predicted if we take into account the revenue for previous periods of work, fixed and variable costs.

The differences between profit and revenue are as follows:

The line between the concepts may not be clear for an ordinary employee, it does not matter to him how the revenue differs from profit, but for an accountant there is still a difference.