Sometimes it happens that the person who made the decision to open own business, is not well versed in the basics and intricacies of economic theory. First of all, you should understand the meaning of such economic categories as revenue, profit and income. At first glance they seem to be the same thing. In fact, this is not at all the case. To successfully start your own business, every entrepreneur must clearly understand the difference between revenue, profit and income.

The mistake is that many beginning entrepreneurs understand revenue as everything received at the cash register. In retail sales, when the buyer immediately pays for the goods upon receipt, this is what happens. But when it comes to mutual settlements made between counterparty enterprises, a tangible difference is revealed between payment for the goods and receipt of it by the buyer. In these cases, revenue is determined regardless of whether a product or a specific service is paid for, precisely at the time of provision of this service or shipment of the product itself.

So what is revenue? Revenue is the totality of funds received for goods, services or products sold and which must be guaranteed to be received by a business entity.

Income

It is equally important for an entrepreneur to clearly understand what income is. Income is an indicator indicating the difference between revenue received from the sale of products, services or goods and. It is worth remembering that if there are no costs for materials when providing certain services, then income equals revenue. Sales proceeds are the total amount of funds received over a certain period as a result of business activities.

Profit

Important! The difference between income and the costs to obtain it is profit. Thus, this is precisely the indicator that determines the performance of an entrepreneur. But here it is necessary to take into account important nuance. If revenue and income are always positive, then profit can be negative. This is the result of an entrepreneur’s activity when costs exceed income as a result.

Types of profit

A person engaged in entrepreneurial activity, you should also know that profit can be gross and net. If we subtract the expenses associated with the income received from the sum of all income, we get the result. For example, if you have income from the sale of a certain product, subtract the cost of that product. A net profit- what remains if you subtract all the expenses of the enterprise from income. IN in this case expenses are the following:

1. Loan payment.
2. All kinds of fines.
3. Taxes.
4. Payment of office rent, etc.

How are revenue, income and expenses determined?

There are two methods by which these indicators are determined:

1st – accrual method “by shipment”. According to this method, expenses, income and revenue are calculated at the time of provision of services, performance of work or transfer of goods. This does not depend on the actual payment. The "by shipment" method is used most often.

2nd – cash method “on payment”. Expenses, income and revenue are determined at the time when actual payment for services, work or goods is made. This method is usually used by small organizations that use cash payments. An example would be stores with retail trade, in which the transfer of goods practically coincides with their payment. This method has some disadvantages. In particular, it can be noted that it lacks the ability to control accounts payable and receivable. This happens because the receipt of funds is taken into account, but there is no accounting of the work performed by the enterprise, services provided or goods sold.

From all of the above, it follows that income, revenue and profit are the most significant indicators of the activity of any entrepreneur, a unique characteristic of his success.

Reference! Income is the amount by which capital grows as a result of its activities or contributions over a specific period of time.

There are 3 income groups:

There are several ways to generate income:

1. As a result of the enterprise's assets - renting out space, attracting investments or accumulating funds placed in a deposit account.
2. Through the implementation of the main activity - the sale of specific services or goods.
3. Receiving personal funds (scholarships, benefits, etc.)

There are forms of income indicators:

• Clean: they call the difference between the final revenue received from the sale of goods or services and the incurred production costs.
• Gross- is an indicator of the results of the organization’s activities. It demonstrates the funds spent on materials.

Attention! Income can take any value: positive, negative, or equal to revenue (the latter is observed in rare cases).

Example of income calculation: Let's assume that over the last year the company sold goods worth 500,000 rubles. The company's expenses amounted to 100,000 rubles. It turns out that the enterprise’s income is: 500,000 – 100,000 = 400,000 rubles.

What is revenue?

Revenue represents the funds received by a company or individual entrepreneur engaged in economic activity, when paying for a service or product. It can also be called "dirty" money: when this value is calculated, costs are not subtracted.

Revenue in all cases is positive or at zero, but under no circumstances can it be negative. Almost always it exceeds income in volume and only in extreme cases is equal to it.

Revenue is determined in 2 ways:

1. By cash method– when the company receives real cash.
2. By accrual– when providing services or shipping goods, the deferred payment is taken into account.

Just like income, revenue has 2 forms:

• Gross– an indicator that takes into account all financial resources received for the sale of a product or service. Another name for gross revenue is net revenue.
• Clean– is the difference between gross revenue, taxes and excise taxes. This indicator is recorded in the profit and loss statements of the organization.

Reference! Another name for net revenue is gross revenue. It shows all the company's income.

Example of revenue calculation: Let's say a medical organization providing hardware eye treatment offers 3 types of services:

1. Exercise on the Visotronic simulator – 200 rub./session.
2. Treatment using the McDel device – 200 rubles/session.
3. Treatment with computer programs– 100 rub./session.

During the reporting month, 150 services were implemented, of which: 600 - on Visotronic, 600 - on McDel and 300 - computer programs.

Let's make a calculation: 600*200 rub. + 600*200 rub. + 300*100 rub. = 270,000 rub.

How are they different?

Although the concepts are very similar, they have their own distinctive features. These definitions may differ according to the following criteria:

Let's look at them all in detail.

What is the difference between the concepts?

№	Difference	Revenue	Income
1	Formation	Carried out when selling a product or providing a service.	Appears as a result of selling shares, receiving interest on funds placed in a deposit account, and attracting investments.
2	Method of origin	Possible only with legal entity or individual entrepreneur who are engaged in economic activities. Other categories of persons cannot have this value.	It can be for any category of persons: an enterprise or private entrepreneur, as well as a student receiving a scholarship or financial assistance, an unemployed person receiving benefits, or a pensioner or disabled person receiving a pension.
3	Calculus	This is the amount of money received from the sale of goods or the provision of specific services.	To obtain the calculation, you need to subtract expenses arising from economic activity.
4	Meaning	Accepts exclusively positive or zero value. Never negative.	It can be anything, including a negative value: when the costs of generating income are greater than the profit received.
5	Ratio	Revenue always exceeds income or, in extreme cases, equals it.

Conclusion

The success of a business largely depends on the level of revenue and income. An economically savvy business owner has every chance of possessing them. high values. This is why it is so important to have a good understanding of these definitions and understand their main differences.

Every aspiring entrepreneur is faced with the need to carefully understand financial terminology. Even if a very competent accountant works for him, he himself needs to understand the basics of production and income generation. In particular, it is important to know what revenue is, how it differs from profit, how its level affects the operation of the enterprise and how it can be planned.

Concept and methods of accounting

Very often, those who are just contemplating their own business or are at the very beginning of their business journey have a misconception about what revenue is. It is often confused with an enterprise, which leads to miscalculations in planning activities. The result, as a rule, is bankruptcy. Meanwhile, it is very easy to understand the difference. Revenue is the result of sales of manufactured products, work performed or services provided. It consists of cash receipts received as payment for goods (barter) and accounts receivable. In addition, revenue is considered to be investment activity when selling non-current assets or securities. However, it is mainly determined by the total income from core activities.

To account for revenue, accountants use two methods:

• Cash - when payment received to accounts in monetary or commodity equivalent is accepted as revenue. This method is used by enterprises whose revenue does not exceed one million rubles per quarter based on the results last year work.
• Accrual method - when revenue is calculated immediately upon shipment of goods to the buyer or provision of services, regardless of the actual receipt of payment. In this case, the risk of debts not being paid on time is higher, so the company is allowed to create taxable profits.

Calculation and planning

Revenue is the main source of financial income for an enterprise; the stability of turnover and work in general depends on its regularity. That is why it is extremely important to timely analyze sales revenue and plan its receipt.

The analysis is based on the difference between the volumes of manufactured and sold products. In addition, it is important to consider factors affecting revenue generation. The main reason for the low level of profitability of an enterprise may be the production of unclaimed or low-quality products. To monitor this situation, it is necessary to conduct market research. In an effort to increase revenue, the enterprise, based on the results of such an analysis, can improve the quality of products, reduce the rate of production (in case of overproduction), change or expand the range.

In addition, revenue levels may be affected by:

• interruptions in work caused by various reasons;
• erroneous pricing policy;
• incorrect marketing approach;
• violation of contractual terms by suppliers, carriers or buyers;
• inflation, changes in legislation.

Among these factors, there are those that can be influenced by the entrepreneur himself, and others that are independent of him. However, regular revenue analysis may, for example, show the need to change the supplier of raw materials or the carrier. After all, the result of work depends on the quality of partnership relations no less than on the characteristics of the products produced or services provided.

When planning revenue, three calculations should be made. The first is a pessimistic forecast, suggesting the worst-case scenario. The second is optimistic, taking into account the ideal combination of all circumstances. The third is a real calculation, which is something between the first two. You should focus on it in the process of activity.

And yet, the basis for planning is the already obtained Formula for its calculation is simple: РхЦ=В, where “P” means products sold in units (or work performed, services provided in quantitative terms), “P” means the price for each unit, and “ B", respectively, the revenue received. Only by performing calculations and analysis is it possible to build prospects for the growth of the enterprise.

Distribution

Having understood what revenue is, you should understand its further distribution. The initial source of funds for an enterprise is authorized capital. In the process of further activity, all necessary payments are made directly from the cash desk. Thus, revenue covers the necessary payments to the budget, tax and social payments, utility and raw materials costs, employee wages and other costs associated with the production and sale of products. Only what remains after making all the necessary payments is net income or

From all of the above it is clear that for every entrepreneur there is an increase total income. For this growth to be sustainable, it is important to clearly understand what revenue is and what factors influence its receipt. Competent analysis and planning greatly help the enterprise to operate and develop successfully, and the owner to receive a well-deserved profit.

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 economics disciplines.

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

Profit

On the other hand, profit or net income is the money that remains in the business after subtracting all costs and expenses from revenue. Legal costs and expenses include operating costs (salaries, equipment maintenance, security, raw material costs and many others), depreciation and capital. Costs can be divided into various 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).

Difference between revenue and profit

For an ordinary 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 wages employees, so what the employee receives in his hands is the remainder after all deductions.

They are also calculated differently. 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. Economics looks at the profits and income of an entire industry or an entire country. This perspective allows a country or industry to assess growth or decline.

Basic information

1. "Profit" and "revenue" are concepts used in business, finance and economics, they are money or its equivalent received by an economic entity (business, company or government) or an individual(workers).
2. Both concepts are used for different levels: personal, business and national. Accounting typically uses a personal and business level to calculate profits and revenues. Economics counts nationally or globally.
3. “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 expenses are calculated.
4. Profit and revenue are constantly involved in the production cycle. "Revenue" is the starting point for profit, and profit provides cash for the next production cycle and increasing revenue.