What is the difference between income and profit? What is the difference between income and profit, their features. The difference between revenue and sales The difference between revenue from sales of goods or
18. Trade turnover and its definition, trade revenue, cost of trade.
Goods in a trading organization they are inventories and belong to assets intended for sale.
Trade turnover is the circulation of goods, the process of moving them from producer to consumer. Trade turnover is distinguished:
- wholesale- promotion of goods from the manufacturer to the retail chain;
- retail- bringing goods directly to consumers.
In turn, wholesale trade turnover is divided into:
Warehouse turnover - sale of goods from a warehouse to a reseller for further resale;
Transit turnover - sale of goods from suppliers' warehouses, bypassing the warehouses of a wholesale organization;
Intrasystem turnover is the release of goods from one base to other bases of the same wholesale organization.
In accounting, the sale of goods is reflected by posting:
V wholesale trade
D 62 “Settlements with buyers and customers” K 90-1 “Revenue” - revenue from the sale of goods by bank transfer is reflected;
V retail trade
D 50 Kr 90-1 “Revenue” - revenue from the sale of goods for cash is reflected.
Trade turnover size a trading organization is determined by credit turnover under account 90 “Sales” subaccount 1 “Revenue”.
To determine trade turnover without VAT, it is necessary to subtract taxes from the volume of trade turnover, the amount of which will be reflected by posting:
D 90-3 “VAT” Kr 68-2 “Calculations for VAT” - VAT is charged.
Trading revenue is defined as the difference between turnover without taxes and the cost of goods sold i.e. this is income...
Retail turnover – sale of goods:
1. For cash and non-cash payments;
2. On credit with installment payment;
3. The cost of packaging having a selling price;
4. Sale of empty containers;
5. Cost of glass containers returned by the population.
Sales proceeds are controlled using cash registers.
19. Valuation of inventory.
Valuation of inventory means the choice of price at which inventory is taken into account in the organization’s balance sheet.
IN wholesale trade Goods are accounted for at purchase price. The purchase price of the goods includes the supplier’s price excluding VAT and excise duty on excisable goods. The purchase price of imported goods includes the contract price (including the costs of delivering the goods to the Russian border), customs duties, customs clearance fees, etc.
IN retail trade, can choose the inventory valuation method:
1) at purchase (acquisition cost) prices;
2) at sales (retail) prices.
The selling price is the purchase price + trade markup: Tsprod = Tspok + N
The organization indicates the method used for valuing inventory in its accounting policies.
The following table shows a diagram of transactions that reflect the receipt of goods in a trading organization, depending on the chosen method of reflecting the accounting value of the goods:
|
Accounting for goods at purchase price |
Accounting for goods at sales price |
|||
|
Cost at supplier prices excluding VAT | ||||
|
VAT presented by the supplier | ||||
|
Trade margin | ||||
When accepting goods for accounting, you should pay attention to the moment of transfer of ownership.
1. As a rule, ownership of the goods passes to the trading organization at the moment the goods arrive at the buyer’s warehouse. The basis for accounting is the supplier's accompanying documents (act, delivery note, delivery note, invoice). The invoice contains the amount, name of the product and VAT. In retail trade, a price register is required.
2. The moment of transfer of ownership may not be specified in the supply agreement. In accordance with the Civil Code, in this case, the seller’s obligation is considered fulfilled at the time of shipment of the goods to the carrier (clause 2 of Article 458 of the Civil Code of the Russian Federation). After receiving notification of shipment, according to D 41 at the price specified in the contract, the goods are reflected in the “Goods in transit” subaccount. Upon arrival of the goods and if the appropriate documents are available, previously made entries in account 41 subaccount “Goods in transit” are reversed, and generally accepted entries are made in accordance with the documents.
3. If the contract states that ownership of the goods passes to the buyer at the time of payment for the goods. In this situation, when an unpaid item is received, its purchase price, based on the supplier’s documents, is reflected in the off-balance sheet account 002 “Inventory assets accepted for safekeeping,” a debit entry is made. At the time of payment, an entry is made on the credit of account 002 and then the usual D 41 Kr 60.
| " |
The main goal of the financial and economic activity of every commercial organization is to obtain profit, which is one of the key indicators of such activity (Article 50 of the Civil Code of the Russian Federation). Also, one of the main indicators of a company’s performance is its revenue. What is the difference between revenue and profit, we will consider in this consultation.
Revenue, profit and income: what's the difference
In order to answer the questions of how income differs from revenue and profit, and also how revenue differs from profit, we will understand how revenue and profit are formed.
The company's income is recognized as receipts of cash, other property and proceeds from the repayment of obligations, which lead to an increase in the capital of this organization, with the exception of deposits of its participants (clause 2 of PBU 9/99).
The organization's income is divided into income from ordinary activities and other income (clause 4 of PBU 9/99).
The company’s income for ordinary activities is revenue from the sale of goods, receipts as a result of the performance of work or the provision of services (clause 5 of PBU 9/99).
Revenue consists of the amount of cash received, other property calculated in monetary terms, and the amount of receivables (in the part not covered by receipts) from the company conducting its main activity, with the exception of the following receipts (clause 3, clause 6 of PBU 9 /99 ):
- amounts of VAT, excise taxes, export duties and other similar mandatory payments;
- amounts under agency agreements, commission agreements and other similar agreements in favor of the principal, principal, etc.;
- amounts received as prepayment for goods, works, services;
- amounts of advances for payment of goods, works, services;
- deposit;
- amounts received as collateral if the agreement provides for the transfer of the pledged property to the pledgee;
- amounts received as repayment of a loan provided to the borrower.
In addition to income in the form of proceeds from the sale of goods, performance of work and provision of services in the main type of activity, the organization’s income also includes other income from other types of activities (investment, financial), with the exception of income specified in clause 3 of PBU 9/99 (clause 4 PBU 9/99).
In particular, other income includes income from the provision of one’s property for temporary use for a fee; proceeds from participation in the authorized capital of another organization; interest on loans and borrowings provided; fines and penalties for violation of the terms of contracts (clause 7 of PBU 9/99).
That is, income is not revenue or profit. These are all proceeds that lead to an increase in the company's capital.
The company's profit is defined as the positive difference between the income received (which includes revenue from the sale of goods and services, income from the rental of property, interest income, fines received, etc.) and the expenses incurred to obtain this income.
What is the difference between revenue and profit (in simple words)
So, income is revenue from the sale of goods, performance of work, provision of services, as well as other non-sales income (clause 4, clause 5 of PBU 9/99, clause 1 of Article 248 of the Tax Code of the Russian Federation, clause 1 of Article 249 of the Tax Code RF).
The difference between revenue and profit is as follows.
Revenue is the volume of sales, the amount of money received from the sale of manufactured or previously purchased products, services provided, work performed (Article 249 of the Tax Code of the Russian Federation).
Profit is the part of income (including revenue from sales of goods, works, services) remaining after reimbursement of costs aimed at obtaining it (Article 247 of the Tax Code of the Russian Federation).
Unlike profit, revenue cannot be negative or zero.
Let's explain with an example. The organization sold goods worth 100,000 rubles in a month. This is the organization's income. The cost of purchasing these goods amounted to 50,000 rubles. Other expenses of the organization per month - 20,000 rubles. Then the organization’s profit for the month will be:
100,000 rub. - 50,000 rub. - 20,000 rub. = 30,000 rub.
For many people, it remains not entirely clear what enterprise profit and income are. And if you delve deeper into this topic, many clarifying terms come up: gross profit, EBITDA, net profit.
It turns out that economists, accountants and statistical officials, when publishing their indicators, have in mind strictly defined meanings of each term. Such definitions are given in state legislative documents, and knowledge of them is mandatory for all reporting employees. But since the area of profitability and profitability is of interest to many non-professionals, it would be useful to understand the essence of the concepts being discussed.
What is revenue?
The most easily understood concept in modern economics is revenue. Indeed, revenue is funds received by an organization or private entrepreneur in payment for a product or service. It seems that everything is simple.
However, revenue has its own characteristics at the moment it is recognized as such. In everyday life, revenue is understood as real money at the time the seller receives it - revenue is determined by payment. There is a name for this case: the cash method of revenue accounting. That is, the company can give its goods to the buyer with deferred payment, and until the money arrives in the bank account, there will be no revenue. The downside of the cash method is the need to count all advances received as revenue.
Another, more common method of accounting for revenue is usually used in large companies. This is an accrual method of accounting for revenue. That is, revenue is recognized as such when the goods are transferred to the buyer or at the time of signing the act of services rendered, regardless of the actual date of receipt of money. In this case, advances for supplies are not considered revenue.
Revenue can be gross or net. Gross revenue is the entire amount of money received for a product or service. Or the full cost of the exchange agreement, if we are talking about barter transactions. This indicator is of little interest, since there are mandatory taxes and excise taxes, as well as duties, which are directly included in the price of the product (service). This means that they must be removed from the buyer's payment and returned to the state.
This is how another indicator appears - net revenue. It characterizes the activities of the enterprise, regardless of the composition and amount of taxes and excise taxes included in the sales price. Net revenue is always reported in one of the main accounting reporting documents - the income statement.
What is income?
Income is the amount by which the capital of an enterprise grows. How can he even grow? One way is through the making of contributions by the owners of the enterprise, and the other is through its activities. After all, any enterprise is created for the sole purpose of generating income.
The classification of income and expenses is so important that statesmen have devoted many documents to it. The most significant of them are the Tax Code and PBU. The Regulations on Accounting “Income of Organizations” provide complete explanations of the methods of formation and types of income of an enterprise.
Without delving into the intricacies of these monumental works, it can be noted that income from core activities is net sales revenue. Income can be equal to revenue, but this is a rare case. Typically, an enterprise carries out a variety of activities, including different types of income.
In addition to income from direct statutory activities, an enterprise can receive other income. For example, interest on keeping your own money on deposit or penalties collected from partners. These incomes are classified as other income, but they also participate in the formation of the enterprise’s profit.
What is gross profit?
By summing up the income received from various types of activities and reducing them by the costs associated with them, a gross profit is obtained. For example, the main activity of selling goods or services forms income, and the cost of these goods or services forms expense. The difference between them will give the gross profit for the main activity. The same approach applies to determining gross profit from other activities.
It is interesting that in trade, gross profit for core activities is the difference between the selling price of goods and their cost. But for industry, this indicator is calculated more complexly; the cost includes many cost elements that are taken into account according to special rules.
Gross profit is a favorite metric for comparing the performance of different businesses. In addition, it is possible to determine the gross profit from various activities within one enterprise and show the effectiveness of the production of different goods. Gross profit is very popular with bankers when calculating the creditworthiness of a company. However, for the owners of the enterprise, another indicator is more important - net profit.
What is net profit?
The result of all operations in the activities of an enterprise for a certain period is expressed by net profit. It is obtained by reducing gross profit by the amount of all costs paid from it. Such costs are classified according to the rules specified in the laws. In general, this is income tax, fines that the company must pay, loan interest and other operating expenses.
Gross profit minus these expenses creates the base from which dividends are accrued to the owners (shareholders) of the enterprise.
It is net profit that shows the final effect of the enterprise, which is displayed in the main accounting document - the balance sheet.
Other types of profit - EBIT and EBITDA
The importance of government regulation in the formation of net profit is difficult to overestimate. In essence, the state sets the rules of the game, regulating those costs for which an enterprise has the right to reduce its profit until a tax is charged on it. These costs, as well as the amount of income tax, may differ by state or even by region within each country.
If an analysis is carried out of the activities of enterprises operating in different countries or under different taxation systems, then no conclusions can be drawn on the basis of net profit. Therefore, for comparison, other types of profit are used: gross, or specially purified. Refined earnings include EBIT (earnings before interest, taxes, and taxes) and EBITDA (earnings before depreciation, taxes, and interest).
The first acquaintance with the main economic categories of the enterprise took place. Now you know what profit and income are and how revenue differs from them.
Some inexperienced entrepreneurs, as well as a lot of other categories of people who are distant from the topic 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 success of their activity and expect unrealistic results and income from entrepreneurial activity.
All of this can lead to significant disappointment, a poorly designed business plan, and in some cases even bankruptcy. That is why it is important to be able to calculate how profit is made and not confuse it with other concepts.
Before starting active commercial activity, it is imperative to understand a little about how the economy works, to consider the basic concepts expressed even in simple terms.
The concepts of revenue and profit are not the same thing, so this issue should be studied well and not be an amateur in it.
What is the difference between revenue and profit?
The concepts under consideration overlap quite strongly, but they are not identical. Even large corporations can have a huge turnover of goods and billions in revenue, and at the same time there is a very real danger of ending up in bankruptcy status.
There are quite a lot of different economic terms in trade, which are often even manipulated, leading people into misunderstanding and inability to understand the real economic situation. But if for an ordinary citizen this is still excusable and not dangerous, then for a businessman ignorance is unacceptable.
The profitability of any business is described by the amount of profit it generates - the difference between the total revenue received by the company and the costs that have to be incurred 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, wages, etc.).
Revenue is defined as the sum of all income that an enterprise receives after selling goods and services, without taking into account any expenses and costs.
As can be seen from these concepts, the difference between them is indeed very significant. Every businessman strives to increase not only 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 effectiveness of any business always depends on its profitability.
What does a company's profit consist of?
Profit is not as simple a phenomenon as it might seem at first glance.
This definition includes such main components as:
- net profit;
- gross;
- balance;
- marginal.
All varieties of the term have their own distinctive features, and accounting practice usually 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 income that has become the property of the company.
To get a specific number of this value, it is necessary to subtract the costs incurred from all revenues to the company’s budget: raw materials, salaries, taxes, fuel for transport, interest payments on loans, etc.
The amount received ultimately equals the firm's net profit.
What is sales profit
This concept refers to the amount of money received from the sale of company 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 company.
- Also, profit from sales is calculated taking into account the volume of successfully sold goods.
To estimate how much money an enterprise will receive before selling the entire planned volume of products, an economic unit such as profitability is taken into account. To do this, it can be useful to study data from past periods of activity and calculate using the following formula:
Sales profit = volumes of goods sold * average price * profitability of the past trading period
To estimate the parameter in question even more accurately, you can use a lot of existing analysis methods and financial programs.
Worth noting: There is also a nominal profit - it does not take into account price increases and inflation, as well as a number of other quite significant parameters.
What is gross profit
This concept, in a sense, shows the success of trading, since it denotes the difference between the proceeds received from the sale of a product and its cost - the funds spent on production, packaging and delivery to the end consumer.
Gross and operating profits should not seem like one and the same thing - in the latter case, the full range of taxes paid, penalties, all kinds of interest on loan obligations and fines is not taken into account.
As for the cost, it can be considered completely differently, for example, if we are talking about trade and full-fledged production.
To determine the cost of goods from the factory, it is necessary to take into account the costs of raw materials, raw materials, lighting and heat necessary for the production of the goods.
Please note: if for each unit of goods an employee receives a certain amount, his salary is also included in the cost of the product.
What is net profit
Only when the gross profit is assessed is the net profit considered.
The general method for calculating it looks something like this: take gross income, which was discussed in the previous paragraph, and subtract all so-called operating expenses, as well as taxes, from it.
Operating expenses include the following expenses:
- payment for transport services;
- payment for rent of premises;
- issuing wages to the workforce, etc.
In terms of taxes, it is necessary to deduct various interest on loans, fines and penalties, directly state taxes and other similar things.
When all these costs are taken into account and calculated, the positive difference between gross profit and them will be net profit.
Types of revenue
What, in turn, are the types of revenue? There is some classification here, but it depends largely on the type of activity of a particular person.
The following types are distinguished separately:
- Revenue from the main activities of a company or individual entrepreneur, received as a result of the sale of goods, provision of services, or performance of any work.
- Proceeds from investments made in another business. This could be the sale of securities, non-current assets, etc.
- There is also revenue from financing activities.
If desired, an individual can also use the concept of annual revenue to indicate the amount of funds received over a certain period.
Total revenue is the sum of all these areas and most accurately characterizes the company's activities.
Sales revenue - what is it?
Proceeds from the sale of a good or service are called ordinary income from its sale.
Receiving such revenue is very clear and its assessment should not cause any difficulties at all.
The cost of a product always appears in any transaction or agreement, so calculating the parameter in question is not difficult.
Sales revenue (B) is equal to:
B = quantity of goods sold * its cost
The average price may appear here, but the assessment result will also be approximate, which in some cases is quite acceptable.
As a conclusion, it is worth noting that entrepreneurial activity is a rather interesting, but at the same time complex process that constantly needs to be monitored and evaluated.
The profit necessary for every business should not be confused in people's understanding with ordinary revenue. It consists of many factors discussed above, and the maximum performance of a business is assessed precisely by its size.
One of the main concepts used in economics and business is revenue. It is with this concept that the activities of most enterprises are connected. Depending on the revenue received, an entrepreneur can assess the demand for a particular product or service, resolve issues regarding the production and purchase of goods in his favor. It is believed that it is the size of profit that determines the success of an enterprise.
Basic definition
It would seem that revenue is the amount received during the sale of goods. But this is far from true, since it depends on a number of nuances and characteristics. Previously, revenue was attributed to one of, but now there is controversy surrounding this issue. Today it is considered income from the company’s core activities, but at the same time, other areas can also generate profit.
The basic definition is: revenue is the total amount of money received during a certain period of activity from the sale or provision of services. It can take either a positive value or be equal to zero, but it will never take a negative value.
Receiving revenue is the final stage in the work of any commercial organization. It is the main overall indicator of the performance of a company or firm. This indicator is planned first, and on its basis the price of the product and its circulation are set. Based on revenue, all subsequent types of profit and income are calculated, and conclusions are drawn about the demand for a particular product.
In the absence of profit, the company inevitably suffers losses, which ultimately leads to its ruin and closure.
Calculation methods
There are two main methods for calculating revenue. At the same time, each of them has a different concept of revenue:
- IN cash method This concept refers to the funds received by the seller of goods from their sale. In fact, this is the amount of payment that the seller received in cash or by non-cash payment. If the goods are released with a delay, the revenue is not recorded until the money arrives in the bank account of the seller or distributor. In this case, all advances received are treated as revenue.
- Method for determining revenue by accrual or shipment . It considers as revenue even those funds that were received in cash and will also be paid through credit or deferred payment. This method is often used in large companies.
Types of revenue
Revenue from the sale of products and services is funds received for products or services shipped to customers. Revenue of this type is divided into two types:
- , which takes into account all funds received for a product or service. In the case of barter payment - the full cost of the exchange agreement. This amount includes not only taxes, but also various fees and duties, which are then paid to the state. The second name for this type of revenue that can be found is net revenue.
- Clean is the difference between gross revenue, taxes and excise taxes. Recorded in the profit and loss statements of the enterprise. Net revenue is also called gross revenue. It is this that forms the main income of the enterprise.
Difference between basic concepts and definitions in trading
When carrying out actions related to the sale of certain things and products, employees have to operate with such concepts as revenue, income and profit. But you should understand the difference between each of these terms.
Net proceeds are often related to the concept of income. But income is a broader concept. Thus, income is considered to be an increase in economic benefits from the receipt of various funds and, as a result, an increase in the capital of the organization. But income can have several sources, not only revenue, but also payment of fines, sanctions, and interest from the bank. All this creates profit.
Money for the purchase of goods, taxes, payment of rent for premises, expenses for sellers. If you subtract this amount from the income received from the sale of goods and services, you can get a profit.
Naturally, revenue significantly affects the income and profit of an enterprise and is one of its main components, but equating revenue with these two concepts is fundamentally wrong.
Revenue components
Revenue consists of two main components:
- purchase price , that is, the cost at which the product was purchased for sale or the material for its manufacture;
- added value , that is, the amount that the seller adds to the purchase price in order to make a profit. This amount is often a percentage of the purchase price of the product.
Thus, if you subtract the cost of goods from revenue, you can get the amount of income received by the company in the course of its activities.
Main sources
To date, revenue can be received from:
- main activity – sales of products, performance of work or provision of services. So, for a store it will be the sale of goods, for a law office it will be the provision of legal services;
- investment activities , which includes working with company shares, securities and even company assets not involved in trade turnover. For example, a large corporation may sell part of its shares in order to receive investment;
- financial activity of the enterprise . For example, the owner of an enterprise invests money in a particular project with the aim of making a profit, puts money on deposit in a bank, and so on.
If you add up the funds received in these three areas, you can ultimately get the total profit of the enterprise.
For example, profit from core activities is 920,789 rubles per month, investment activities - 34,000 rubles, financial activities - 265,000, therefore, the total profit for the month will be: 920,789 + 34,000 + 265,000 = 1,219,789 rubles.
In accounting, this concept refers to funds received from the main activities of the company, while the remaining funds are usually called “other income” or “interest income.”
Basic functions
The main function that revenue performs is to reimburse the funds spent by the company on the purchase or production of goods. Its timely receipt into the company’s accounts ensures not only the stability of its work, but also the continuity of trade turnover and the company’s activities.
With the help of the proceeds received, bills of suppliers, both goods and materials, wages, and taxes are paid. In addition, the proceeds received can be used to purchase new goods or materials or expand the company’s activities.
If revenue arrives late, the company's activities suffer losses, as its profits decrease, penalties may be imposed, or contractual obligations related to the production of goods or payment of certain bills may be violated.
Revenue calculation
Quite simple formulas are used for calculations. It is enough to know the volume of products sold over a certain period of time and the cost per unit, then multiply them. Next, the obtained values for each group of goods are summed up. It is worth noting that funds received during the operation of the enterprise are not included in revenue.
The formula looks like this:
TR = P * Q, where
TR – revenue, rub.;
P – price, rub.;
Q - sales volume, units/pcs.
For example, let's calculate the revenue of the Vesna store from the following products:
- Tea - 23 packages sold, each cost 105 rubles.
- Sugar – 3 kg, 40 rubles each.
- Lemon – 1 kg, cost – 200 rubles.
- Revenue for tea was – 23*105 = 2415;
- Revenue for sugar – 3*40=120;
- Revenue per lemon – 1*200=200.
The total revenue of the store for this group of goods was 2415 + 120 + 200 = 2735 rubles.
If a product was initially sold at one price, and then its value increased, then revenue is calculated for each product depending on its cost, and then added up.
For example, at the beginning of January, 120 packs of tea were brought to the Solnyshko store for 105 rubles, and in February another 76, but with a cost of 110 rubles. At the same time, there are still 20 packs of tea left in the store at the old price.
Within a month, the remaining 20 packs and 34 packs from the new batch were sold. Thus, the revenue for the sale of tea in February will be: (20*105)+(34*110)= 2,100 + 3,740 = 5,840 rubles.
The data obtained during the calculations is considered information for internal use and is not included in the financial statements.
However, once a quarter or a year, these indicators are calculated by an accountant and recorded in the “Profit and Loss Report”. In this case, the amount of revenue without indirect taxes and VAT is indicated (see also). Besides , in some cases, the amount received during the sale may not entirely belong to the company. For example, when selling consignment items, the seller receives proceeds from the buyer, the main part of which belongs to the owner of the goods.
For example, the Solnyshko consignment store accepted the following items for sale with the proviso that the people who provided them or the consignors would receive the following amounts:
- Children's chair - 450 rubles.
- Manege - 890 rubles.
- Kangaroo – 500 rubles.
The store sellers also added a 20% markup on the goods, that is, the final cost of the items was: 540, 1068 and 600 rubles, respectively. After the sale of these items, the profit of the Solnyshko store was:
(540+1068+600) – (450+890+500) = 2,208 – 1840 = 368 rubles. The remaining amount, according to the previously drawn up agreement, will be received by the principals.
The reports prepared by the accountant are provided to the company's management. Based on them, conclusions are drawn about which goods are in greater demand and which are in less demand. Consequently, this helps to shape the volume of purchases of a particular product.
Video: Revenue and profit
From the video lesson you will learn what revenue is and how to calculate its main types: total, average and marginal. In addition, the lesson also talks about profit, the main factors of its formation and its impact on the development of the company.
Learning is the funds received during the sale of goods or services. Thanks to revenue, you can draw conclusions about the work of the enterprise and adjust its activities. A delay in the receipt of revenue leads to losses for the enterprise, and its absence leads to its closure.