What is the difference between income and profit? What is the difference between income and profit, their features

Few ordinary people will be able to answer the question of how the income from profits differs. Both concepts mean the arrival of cash and the possibility of their investment in the future. And how these figures relate to revenue is also a mystery for the reader, who is not economical. However, this oversight can be easily eliminated, it is enough just to understand the terminology.

What is meant by the term "revenue"

We will find out what is the profit, income and revenue of the enterprise.

Revenue is the money received by the enterprise for the sale of goods (works and services) in a particular period of time. It can be calculated by separate groups of goods or by type of activity. At the same time, the company's revenue directly depends on the unit price of the product and the sales volume.

Let's consider an example. Suppose the company organizes passenger transportation and offers three types of services with a fixed price, that is, not depending on mileage: a trip around the district - 50 rubles, a trip between districts - 100 rubles, a trip to the suburbs - 200 rubles. During the reporting month, 1000 services were implemented, of which: 500 - by district, 300 - between districts, 200 - trips to the suburbs. You can calculate the revenue for each type of service.

The total revenue will be 95 tr., Based on the calculation:

50 rubles. * 500 + 100 rubles. * 300 + 200 rubles. * 200 = 25 tr. + 30 tr. 40 tr. = 95 tr.

In the following examples, introducing additional data, let's see what the income from profit differs.

In the accounting department the following methods of assigning the received funds to the proceeds are made, namely: cash and accrual method. According to the first method, the company's revenue arises at the moment when funds are received, that is, when they arrived at the settlement account or at the cashier. However, this method does not take into account netting and requires advance payments to also be credited to revenue. Therefore, some enterprises keep a record of revenue according to the accrual method, according to which revenue appears at the time of the conclusion of supply contracts and shipment of goods, while the money from sale in fact may not yet come to the disposal of the enterprise.

Distinguish revenue gross and clean.

Proceeds gross and net

Gross revenue is the money received for the sale of goods (works and services) before taxes, duties and mandatory payments that were included in the price. The following determinants influence the gross proceeds of the enterprise in addition to the main factors of price and quantity of products sold:

• volume of production;
• Proposed product range;
• Quality of goods;
• Availability of ancillary services;
• Labor productivity;
• The level of effective demand, and so on.

By this principle, we can conclude that the difference in gross income from gross profit. But we'll talk about this later.

Net proceeds are obtained after the "cleansing" of gross receipts from VAT and other taxes, deductions, discounts and the cost of defective products returned by buyers after purchase. Similar indicators are calculated for both income and profit.

What is meant by the term "income"

Now we'll figure out how the income from profits and revenues differ.

The enterprise can receive money resources not only from the basic kind of activity. The income of the enterprise is formed by income from all types of activities, reduced by the amount of material costs, excluding wages. The material costs, which are calculated in the cost of production, include:

• Remuneration of labor;
• Social contributions to the relevant extra-budgetary funds;
• Raw materials and materials, fuel and electricity;
• Depreciation;
• other expenses.

What is the difference between income and profit? It turns out that income includes profit and labor costs.

Let's consider an example. Suppose that during the period under consideration the passenger transportation enterprise incurred the following costs:

• Staff salaries together with deductions - 40 tr.
• Fuel - 20 tr.
• Amortization - 10 tr.
• Other expenses - 5 tr.

Total costs of the enterprise without taking into account the payment of labor amount to 35 tr. Then the income can be calculated as follows: 95 tr. - 35 tr. = 60 tr.

Running a bit ahead, we note that the profit will be 60 tr. - 40 tr. = 20 tr.

Provided there is no seasonality and an even demand for the carrier's services, this business will bring to the head an annual profit of 240 tr.

If the enterprise does not bear material costs, then the amount of income will fully coincide with the amount of revenue from sales.

Income gross and net

The income shows, on what value for the accounting period the capital of the enterprise has grown. It can be gross. Tax-free gross income will be equal to net income.

Note that revenue, as well as revenue, is always a positive economic indicator, while profit may be negative in the case of unprofitable activities. This is the difference in gross income from profits.

After deducting tax and other mandatory payments, the income becomes clean. Then it is divided into three components:

1. The cost of labor and social policy of the enterprise or the consumption fund.
2. Cash received from successful investment activity or investment income.
3. The cost of insurance premiums or insurance income.

Income in microeconomics

In microeconomics, incomes are divided into three types:

1. Total revenue, it represents a monetary amount from the sale of a certain good. It is calculated as the product of the price of the goods by the volume of sales. In this case, the cumulative revenue is equal to the sales revenue.
2. Average income, which corresponds to the income received from the unit of the sold good. The indicator is obtained by dividing the total income by the value of sold goods in physical terms.
3. Marginal revenue shows the amount of increment in income for each additional unit of the good.

Next, we'll look at how revenue from profits differs.

And what does the term "profit" mean

Profit is the difference between earned income and costs incurred as a result of commercial activity. In a simplified form, the profit is already put into the cost price of the goods: Price = Costs + Profit.

It turns out that profit is the ultimate goal of the activities of commercial enterprises and entrepreneurs.

But non-profit enterprises are created for the implementation of socially significant activities related to:

• Science;
• Education;
• Charity;
• Policy;
• Culture;
• Social sphere, etc.

These enterprises can conduct profitable activities, if it is aimed at achieving the main non-commercial goal. There is no question of profit here at all.

Interesting in terms of profitability are municipal enterprises, in which subsidies are one of the income items. These enterprises do not prohibit to be profitable, but by definition they tend to at least achieve breakeven. Moreover, payments from the budget are calculated only to 0 in the financial result. The city acts as a customer for social services. And if these same services are related to the main activity of the enterprise, then profit can only be obtained from additional sources.

Profit gross and net

Gross profit - this is the calculated income from all activities of the enterprise, reduced by the related costs.

What is the difference between net income and net profit? By analogy, the net profit is a "tax-free" revenue indicator that a company manager can use at his own discretion:

• To direct on development of business, new or available directions of activity;
• Pay the body of the loan and interest on it;
• Encourage enterprise employees with additional incentive payments;
• Invest, and so on.

Profit in microeconomics

In microeconomics, there are two types of profit: accounting and economic.

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

Taking into account the economic costs, including the implicit costs associated with the alternative to economic choice in conditions of limited resources, then it will be economic profit: revenue minus economic costs.

Let's consider an example. Since the head of the enterprise for passenger transportation at the time chose the entrepreneur's way, and not the way of an employee with savings in the bank, then he formed alternative economic costs, for example, such:

• Savings in the bank account, which were invested in the development of business - 60 tr.
• Less received interest from the stay of money in the bank - 6 tr.
• Lost wages from work for hire per year - 180 tr.

It turns out that the annual profit of 240 TR, counted by us earlier, should be reduced by the amount of economic costs:

240 tr. - (180 TR + 60TUR + 6T.R.) = -6 TR.

The given business for the businessman will not pay off for a year. If the company's accountant congratulates the head on the annual profit, then the entrepreneur himself will assess the effectiveness of the business as satisfactory.

Summary

Let's summarize and answer the question about what distinguishes income from profits, what is the difference between them and revenue, highlighting the main points in theses:

• Revenues and income are always positive economic indicators. The profit can be positive (the enterprise is profitable), negative (the enterprise is unprofitable) and equal to zero (the enterprise is in the break-even point).
• Income includes profit, as well as labor costs for employees of the enterprise and the social component of domestic policy.
• Profit is a calculated indicator. It can take into account implicit economic costs. The income can always be calculated and entered in the balance sheet.
• Even more than income from profit, so it is a legislative link: commercial enterprises are working to achieve profits, profit-making enterprises should not receive profit at all, and municipal ones can be profitable, but subsidization assumes only the break-even achievement. All enterprises can receive income.

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