Net profit and net income are two, at first glance, identical concepts. All the subtleties of the terms have been studied in detail by economists, thanks to the study of a huge amount of special literature. But it would not hurt for an ordinary person to know, at least in general terms, what are the fundamental differences of concepts, especially if opening their own business is on the horizon. It is difficult to judge the profitability of a business if income and profit are taken as synonyms interchangeable with each other.

Distinctive features of the concepts of net profit and income

The net profit is considered balance after all operations for a specific period of time, in other words, funds after deducting various production costs, taxes, possible fines, interest on loans, and so on. It is the source for the creation of reserves and deductions for production processes.

Stable profit growth has a beneficial effect on capital turnover. This is the final indicator of the performance of a company or enterprise, which is reflected in the accounting report, and affects the amount of winnings for owners. Profit is classified:

1. By distribution costs (economic, accounting).
2. Based on the results of the enterprise's activities (normative, under-received, maximum possible).
3. Depending on taxation (taxable and non-taxable).

Net income is called absolutely all monetary, material resources received on the account of an individual, legal entity, institution or state for a certain period of time. Income forms the amount as a result of trade, sales of products, services and core activities. The amount of income depends on the cost of the product and the situation in the sales market as a whole. The amount after payment of taxes is distributed to:

1. Income generated from investment transactions.
2. Employee salary costs.
3. Insurance premiums.

An elementary example of determining net profit and income

In general, the formulas for calculating the quantities under consideration look quite simple:

• Net income = All revenue for a specific time.
• Net profit = Net income-all production costs, sales for a specific time.

Thus, net income is the difference between net income and all kinds of expenses. For clarity, a simple example can be given. Some premises are rented to open a small grocery store. During the first month, 700 thousand rubles were received at the cashier's office. - this is net income. But it is too early to talk about profitability and payback. It is necessary to understand that approximately the following deductions will follow from the money received:

1. Payment of taxes.
2. The cost of renting a room.
3. Utilities (e.g. electricity, water supply).
4. Staff salaries.
5. Fare.
6. Purchase of goods for the next month.
7. Payment of interest for the use of credit funds (if the owner required them to open his own business).
8. Product and store advertising.

In addition to those listed above, other types of expenses are possible. After carrying out the relevant calculations, the results are summed up:
When subtracted from 700 thousand rubles... there is nothing left, and in order to make all payments, a private entrepreneur has to use his personal savings. The current situation only suggests that the business is unprofitable. Consideration should be given to closing it.

It is possible that after all the deductions, nothing remains, but it is not necessary to use additional funds from the outside. We get zero profit. This situation suggests that the entrepreneur has reached the break-even point. The marginal profit is possible due to the sale of additional goods. But good performance in this case does not always mean high profits in reality. In addition, in the event of a decrease in the price of a range of goods, the profitability of the business as a whole is undermined. This technique should be practiced for a short time and not for all products.

The most favorable outcome, if after the necessary deductions and costs, there is still a certain amount, for example, 200-300 thousand rubles. The owner then invests it in the development and expansion of the store or spends it as he sees fit. The presence of net profit as a result of the activity, its value speaks of the profitability of the business.

In conclusion, it is worth noting that net income is significantly less than income. In the practice of private entrepreneurship, it is always a decisive indicator and is of greater importance. A steadily growing profit is what you need to strive for in the practice of private entrepreneurship.

Revenue is a key concept in business. This is an indicator of the activity of any enterprise. To determine it, a number of calculations are required. Many people confuse revenue with profit. However, these are different concepts.

The concept of revenue in simple words

Revenue- This is the income from the activities of the company, the totality of funds received for the performance of services or the sale of goods. Calculated over a specified period of time. Earlier, revenue was considered a form of profit. However, now this issue is disputed by many experts.

IMPORTANT! The activity of the company depends on the amount of revenue. It is the receipt of funds that is the result of the activities of the enterprise. If these funds are very small, the organization is considered unprofitable.

What is the revenue calculation for?

This indicator is the most important concept in the company's activities. Its calculation is carried out for the following purposes:

• Analysis of the demand for the services provided and the goods sold. Based on the results of the analysis, an entrepreneur can draw up a strategic production plan, determine a procurement plan.
• Based on the size of the revenue, you can get an idea of ​​the economic success of the company.
• This is a key indicator of the company's performance. If there is no revenue, this is a sure signal of the need to make changes in the work.
• Based on the revenue, the cost of the products sold is adjusted, the circulation is determined, for which there will definitely be demand.

First of all, the head of the company needs to know the amount of revenue. But this information can be requested by business partners, creditors and investors.

Revenue functions

The main function of revenue is to compensate for expenses, funds that were spent on the purchase of goods or on their production. The funds received from the activities of the enterprise are credited to the accounts. Timely translations are provided by:

• stability of the company;
• continuity of goods turnover.

Usually, the proceeds are spent on the following purposes:

• payment for the services of suppliers;
• purchase of products or materials for its production;
• payment of salaries to employees;
• payment of tax levies;
• expansion of the enterprise.

That is, funds are usually invested in developing the business and maintaining its viability.

Delayed receipts of revenue have negative effects:

• losses of the enterprise;
• decrease in profit indicators;
• payment of fines accrued for failure to meet the deadlines for loan payments;
• violation of contractual obligations to business partners;
• inability to pay all bills.

The head of the organization must ensure the uninterrupted receipt of revenue. Business cannot exist without regular and timely receipt of funds.

What can be included in revenue?

The indicator under consideration includes:

• the purchase cost at which the products were purchased;
• added value that appeared during the sale of goods.

That is, the revenue takes into account the full price of the product sold.

The sources of revenue are:

• The main activity of the enterprise (for example, the sale of goods and the provision of services).
• Investments (work with securities, sale of shares).
• Other financial activities (for example, receiving funds from a company to which the enterprise's investments were previously directed).

The list of sources depends on a specific company and its type of activity.

Calculation example

The store sells washing machines at a cost of 5,000 rubles. During the month, 100 washing machines were sold. The cost of household appliances is multiplied by the number of units sold. That is, the store's revenue will be 500,000 rubles a month.

The amount of revenue must be indicated in the accounting records. This indicator is prescribed in stanza 2110 "Revenue".

IMPORTANT! Revenue is taxed, and therefore tax deductions must be deducted from this value.

How is revenue different from profit?

Revenue is the aggregate of funds received from activities. The costs of the enterprise are not taken into account. Profit is the difference between revenue and expenses. Expenses are understood to be the costs of ensuring the activities of the enterprise. Let's consider all the differences:

• Calculus... The amount of revenue can be zero or positive. The profit can take negative values.
• Composition... To obtain information about the proceeds, it is enough to know all the income of the enterprise from its activities. To calculate profit, you need to know not only about the amount of income, but also about the amount of expenses.
• Real expression... Revenue may be potential. For example, a company provides customers with the opportunity to arrange an installment plan. There may be no funds on the company's account, but there is a guarantee of their appearance. There can be no “virtual” profit. It is calculated based on actual values.
• Expression... Revenue is a definition that can be interpreted in a single meaning. Profit can be divided into two forms: gross and net. Net income refers to the amount of income received after all taxes have been paid.

Profit and revenue differ significantly in a number of key ways.

Example

The company sells phones for 1,000 rubles. We manage to sell 500 phones a month. The revenue is 500,000 rubles. The same company spends certain funds on its activities. They go to pay the rent for the premises. The monthly rent is 50,000 rubles. The company also has to pay salaries to its employees. In total, the salary will be 100,000 rubles.

It is required, first, to add up all expenses. They will amount to 150,000 rubles. All expenses are deducted from revenue. The profit will be 350,000 rubles.

Can revenue be negative?

Revenue can be either zero or positive. If all the income of the enterprise is missing, the value will be zero. This indicates that the company is not engaged in any activity. This feature is connected with the fact that nothing is deducted from the proceeds. If it is completely absent, then the company does not receive any funds at all.

FOR YOUR INFORMATION! But the profit can be negative. For example, a company sold goods worth 10,000 rubles, and the cost of renting an office is 20,000 rubles. In this case, the organization will go into negative territory by 10,000 rubles.

Revenue is an important concept when doing business. Allows you to determine all the income of the enterprise. Gives an idea of ​​the demand for products or services, the stability of work. Based on it, prices for goods are established, their circulation is determined. It differs from profit in that nothing is deducted from the indicator under consideration. Usually the funds from the proceeds received go to the needs of the business and to ensure its smooth operation.

Every entrepreneur should know what the income and profits of the enterprise are, as well as how they differ from the proceeds.

Profit and income are the main financial indicators of the economic activities of various organizations, regardless of the form of ownership. They can give an idea of ​​the overall profitability of the enterprise.

The costs of social and industrial development of the firm should be financed from profit. The source of financing of the state budget is considered to be the corporate profit tax.

What is revenue (turnover)

Revenue - funds received (received) by an enterprise, firm, entrepreneur from the sale of goods and services, proceeds from sales. That is, this is the entire amount of money that turned out after the sale of the goods.

Example of revenue (turnover), Petya sold 100 phones for 10,000 rubles each. The revenue will be 100 * 10,000 = 1,000,000 rubles.

The proceeds from the sale of certain products are divided into two main types - net and gross:

• Under the net proceeds means the amount of money after all kinds of deductions, taxes, discounts and the cost of the returned goods.
• Gross proceeds- This is the total amount of cash receipts after the sale of a certain product or the provision of services.

Revenue = this is revenue (turnover) - the cost price (or purchase price) of a product or service. Taxes are also deducted from this amount. Material costs are funds that were spent on the purchase of products or necessary equipment. These costs include a variety of social contributions. The issuance of wages has nothing to do with this category.

Example of income, let's say the cost of Petya's phones is 5000 rubles. Only 100 pieces, which he sold at 10,000 rubles each. Then income = 100 * (10,000 - 5,000) = 500,000 rubles.

Labor costs and profits are the main components of the income of a particular enterprise. The market value of a product and the general market environment have a direct impact on the level of an organization's income. Potential income from individuals and legal entities does not belong to the revenue side of the company.

If income is subject to tax payments, then after deducting them, an amount remains, including the following elements:

• Insurance and investment income. These are the amounts received in the course of investment activities and the cost of insurance premiums.
• Consumer funds, the activity of which requires spending on the social sphere.

Incomes can be marginal, total and average.

• Marginal income- This is the difference by which the total income of the organization changes after the sale of a certain unit of goods. Demonstrates the total return on investment of the firm.
• Total income- This is the final result of the business of the company, the difference between the cost of goods and production costs.
• Average income received after the sale of one unit of goods. It is equal to the price of a particular product sold.

Experts also highlight the concept of other income. These include a variety of penalties, interest for placing a deposit.

What is profit

Profit is the difference between costs and revenues where the latter is an indicator of financial performance.

Example of profit, Petya's income from the sale of phones amounted to 500,000 rubles. But you still need to pay taxes, pay the manager's salary, pay rent, etc.

Maximizing profits has always been one of the main goals of a successful businessman. It is considered the most important generalized valuation indicator of the activities of a particular company.

This concept includes the following main components:

• Profit from the sale of property and the sale of tangible assets.
• Funds that were received from additional (non-core) activities of the organization. This refers to securities, dividends, funds from renting out real estate.
• The difference between the funds that were received from the sale of a particular product and its present value.

If it was found that the profit of the enterprise is equal to zero, the costs can be considered the result of such economic activity. The limiting indicator of this concept can be obtained by selling an additional copy of the product.

There are several main functions of the company's profit:

• Provides funds for the development of the company.
• Forms taxes on the profits of commercial enterprises.
• Shows the final economic result of an ordinary enterprise.

For productive profit management, experts recommend taking into account its maximum indicator, which you need to focus on. Some executives of firms are actively practicing lowering the pricing policy. But this should not be aggravated. With a high demand for the product, the profitability of the enterprise as a whole can fall dramatically.

Experts advise offering their customers inexpensive analogs of goods and services that are considered the most popular. Such measures will help to maintain the attractiveness of products and the normal price range.

This financial indicator has several classifications. By the result of economic activity:

• The minimum allowable and maximum possible, which happens at minimum costs and maximum profit.
• Regulatory- this is the standard minimum indicator provided by the enterprise.
• Lost- a loss that has arisen due to the fact that one of the participants in the transaction has violated its obligations.

Profits may or may not be taxed. It is differentiated into economic and accounting depending on costs. The first is the difference between accounting profit and additional, forced expenses.

As for the second option, it is positioned as the difference between the costs incurred and the income of the enterprise.

Gross profit is the difference between the total income of a particular organization and the amount of costs. Net profit can be calculated by deducting all associated costs from gross profit.

About EBIT and EBITDA Profit

These are two more types of profit that should be separately emphasized.

EBIT profit is positioned as an intermediate value between gross and net indicators. Some people think that this is an operating profit and they are mistaken. This concept can also include non-operating profit. The amount of EBIT profit can be calculated based on the amount of profit and loss before taxes are paid. This indicator should be positive.

The value of profit directly depends on the depreciation rate and the method of its calculation.

EBITDA is the sum of earnings before interest, depreciation and taxes, showing only cash flow. This analytical indicator is calculated on the basis of the financial statements of a particular organization and is the main indicator of how profitable the company is in general, regardless of various debts and methods of depreciation.

Having determined EBITDA, you can calculate the debt burden of the organization. To do this, the debt indicators are divided by the nominal profit.

The indicated values ​​of EBIT and EBITDA are reduced to one thing - "bringing to a common denominator" of economic indicators of organizations from different countries. The tax systems of different countries are not similar to each other. This means that income tax rates will not be equal either. The introduction of EBIT and EBITDA profit into accounting practice helps to correct this situation.

Experts in the economic field have a generalized point of view on getting the maximum profit for a particular firm. You need to balance marginal revenue with marginal cost. In this case, the profit of the enterprise should be maximized. But still this is individual for different organizations.