The difference between total revenue. Revenue and profit - what's the difference? Methods for determining revenue
ATTENTION: If you describe what it is in simple words, then revenue includes the cost of goods or the purchase price plus added value. This is all the money that came to the company from the sale of the company's product.
From point of view economic justification, the definition of revenue is the total volume Money, which were received during a certain period of activity from the sale of goods or provision of services. It is expressed as a positive value, but it can also be equal to zero, the main thing is that it will never take a negative value.
In economics the term “Revenue” is the sum of all income from sales of goods, services and assets before deducting any costs. For many companies, revenue consists not only of sales, but also interest, royalties and other income. For an LLC or for a company from another legal form is the totality of all goods and services sold.
For an enterprise, revenue is the basis of the business. It shows the demand for a product or service produced by a given enterprise. The work of most companies is based on receiving revenue, because, depending on this, the entrepreneur is able to assess the level of demand for a product or service, and resolve issues regarding the purchase and production of goods in his favor.
This economic indicator is the final completion of the enterprise’s activities, and the calculation of this indicator is carried out by multiplying the price by the number of units of goods sold.
For a company, revenue is the total of all goods and services sold.. Formally, only periodic income accounted for in accordance with the appropriate accounting model adopted in a particular company is called revenue.
The higher the revenue, the better, the faster the company's shares can grow.
What factors does it consist of?
Differences
Profit and revenue are not the same thing. Distinctive characteristics profit from revenue:
- profit represents the total revenue from which the company's costs have been subtracted;
- Unlike revenue, profit can be obtained with a negative result.
What is common is that the data economic values you can always predict. Taking into account the indicators of the past period, we can predict what the profit margin will be in the future; we just need to take into account the expected costs and changes in market conditions.
Distinctive feature of income from revenue:
- the increase in income occurs as a result of the receipt of assets that increase the capital of the organization;
- income is an indicator that increases the capital of an enterprise;
- capital that arose through payments from founders and owners is not income;
- income for the enterprise is possible as a result of the implementation of the main activity;
- income is an indicator of net revenue received from the sale of services, work or goods for various purposes.
Gross profit is the result of the amount of revenue minus associated costs. For trading enterprises, gross profit is the difference between the selling price and cost (?). Gross profit indicators usually compare the degree of efficiency various enterprises. is a more specific indicator that forms the completed stages from productivity to product sales.
Reasons for decrease and ways to increase
- incorrect conclusion or extension of contracts for the supply of products;
- violation of contract clauses relating to the volume, range and quality of products, as well as shipment deadlines;
- the customer’s refusal of the product due to its surplus in the warehouse;
- violations during settlement operations;
- incompetent study of consumer demand;
- poor quality work and lack of knowledge of the sales market;
- lack of safety stock of products;
- failure to fulfill urgent orders;
- deliveries for sale of expired products;
- unqualified personnel in the field of marketing;
- passivity of specialists in the field of market research.
Each enterprise or organization provides. This indicator is formed from:
- increase in the quantity and quality of goods ready for sale;
- leasing or selling equipment and material assets;
- rational use of materials, working areas and capacities;
- end-to-end control of production diversification;
- progression of all indicators in the sales market;
- reducing costs per unit of production;
- increasing labor productivity;
- reducing losses and expenses that are not related to production;
- bringing production to a new technological level.
You will find an example of how to increase revenue in a grocery store in.
How to calculate it yourself?
To independently calculate revenue, there are 2 methods, which are formed after the fact:
- payment for products;
- shipment of products.
The first method can be applied if it is transferred to the company’s current account after the sale of goods or provision of services from the buyer.
Revenue is calculated by multiplying the quantity of products sold by its selling price. And :
B=Vр*Цр, Where:
- B is revenue.
- Vр is the quantity of products sold.
- CR is the price of products sold.
The second method is used if the product has been shipped to the buyer and this fact is recorded in the relevant settlement documents.
Revenue is calculated by multiplying the quantity of products shipped by the selling price and is calculated by the formula:
B=V dept*C dept, Where:
- B is revenue.
- Vogr - quantity of products shipped.
- Tsotp - selling price.
Taxation (USN, UTII, with and without VAT)
According to Art. 17 of the Tax Code of the Russian Federation, the taxation system is based on the following elements:
- receiving profit or income;
- determination of the tax base;
- determining the amount of tax charges per unit of measurement of the tax base;
- tax calculation procedure;
- procedure and timing of tax payment.
This process is regulated by the following tax regimes:
For large organizations working with VAT, it is more profitable to work with suppliers who also pay VAT. This allows you to choose among a number of competitive organizations the one that applies the simplified tax system under equal conditions.
Go to UTII from common system taxation is possible from any date. With the simplified tax system - only from the beginning of the year.
Read how revenue is accounted for with and without VAT, and we will talk about the procedure for reporting it in the financial results statement.
Reflection in accounting
B is recognized when the following legal and economic conditions are met:
- To receive revenue for legally an organization or enterprise must have the right to do so, which is provided for in a specific agreement.
- The amount of revenue can be determined.
- There is confidence that as a result of the transaction with a product or service, this will be followed by an increase in economic benefits.
- The service was provided in a timely manner.
- The costs of transacting a product or service can be determined.
If at least one of the above conditions is not met, not revenue will be recognized in accounting, but accounts payable.
Read on what account the revenue is reflected in the accounting department, and it will tell you how to find the revenue indicator for the month in 1C.
Sales of goods, works, services
In practice, two methods are used to determine the fact of product sales:
- accrual method;
- cash method.
The amount of revenue in the production sector is influenced by:
- production volume of products;
- assortment range;
- structure of products;
- quality characteristics of products;
- competitiveness in the market;
- rhythm of product release.
The amount of revenue in the sphere of circulation is influenced by several factors:
The proceeds that are credited to the company’s account are used to pay for:
- invoices for receipt of raw materials;
- materials and semi-finished products;
- components;
Conclusion
To obtain revenue, it is necessary to conduct a systematic analysis to determine the significant factors and criteria that form it. Factoring and the introduction of payment for receivables will help increase the efficiency of revenue collection for enterprises that conduct honest business with the buyer.
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 when planning and when analyzing current activities, they are used financial indicators. Among the mandatory ones are revenue, income and net profit. These concepts are often confused.
Revenue
Revenue refers to funds received for sold products or services provided. There are 2 ways to reflect revenue:
- cash method;
- accrual accounting of revenue.
The cash method assumes that only money actually received is included in revenue. It shows how much the company already manages. But revenue also includes advances for which the company has not yet fulfilled its obligations.
In accrual accounting, revenue is recorded at the time the goods are shipped or the service is provided. In this case, the indicator shows sales volume, but does not take into account the fact that the buyer may be dishonest and will not pay for the purchase.
From an accounting point of view, the company’s revenue is divided into 2 types:
- gross;
- clean.
Gross revenue is the payment received for sold goods or service. Net proceeds are gross proceeds minus excise taxes, taxes, fees and duties directly included in the price of the goods. It is reflected in a mandatory document - the profit and loss statement.
The revenue indicator does not reflect the company’s operating efficiency, because revenue also comes from unprofitable enterprises, but it characterizes the company’s share in the market. To calculate this share, you need to know the sales volumes in the industry for the reporting period.
Income
Income includes all receipts, not just those related to the company's core activities. This includes interest on deposits or collected fines and penalties.
If revenue is strictly planned, then income may be unplanned, for example, if a partner violated the terms of the contract and paid a penalty.
Profit
Profit is the basic indicator for assessing the performance of an enterprise. It is this that primarily interests shareholders, because dividends are paid from profits.
Gross and net
There are gross and net profits.
Gross profit shows the overall performance of a business. To calculate it, you need to subtract costs from income for a certain period. Banks and the state will also want their share of this “pie.” Therefore, company shareholders pay attention to net profit.
Net profit is what the company works for. It is not necessarily paid out in full to shareholders. To calculate net profit, mandatory payments are subtracted from gross profit:
- taxes, fees and fines (that part of the “total” profit that is due to the state);
- interest payments (goes to financial institutions who issued the loan to the company).
The remaining money is called retained earnings. They are reinvested, that is, used for the benefit of the company. This is an alternative to a bank loan or other external financing. How much money to give out in the form of dividends and how much to spend on development is decided by the meeting of shareholders.
If the net profit is negative, it is called an uncovered loss. Until profits cover losses, the company does not pay income tax.
EBITDA and EBIT
There are 2 more profit indicators that are not reported, but are used in financial modeling, when evaluating projects, and are of interest to investors: EBIT - earnings before interest and taxes, and EBITDA - earnings before interest, taxes, depreciation and amortization.
EBITDA was originally created to measure whether a company can pay off its debts. This parameter, together with the net profit indicator, reflects the amount of payments that the company will make in the fixed-term period.
It illustrates the income that a company receives in the current period. It is easy to carry forward to future periods, so it is used to assess the return on investment and the possibility of self-financing.
EBITDA allows you to compare companies regardless of type and accounting policies. The comparison is not affected by the size of the investment, the loan burden and the tax 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 spend a large share of their costs on depreciation (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 along with EBIT.
Another drawback of EBITDA and EBIT is that the calculation takes into account not only the results of core activities, but also one-time income. This makes it difficult to analyze the company. To get rid of such “information noise,” other income is subtracted in calculations or operating profit is used. This predicts the firm's ability to generate cash flow. But the problem is that these additional transactions can cause financial manipulation, and the indicators will ultimately be overestimated or underestimated.
Activity commercial organization can be characterized by its revenue and sales. What is their specificity?
What is revenue in a business?
The revenue of a commercial enterprise is usually understood as the amount (or list of property in in value terms), which he received as a result of sales or provision of 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. The exception is the taxation mechanism, in which the corresponding cash receipts to the enterprise account are not taken into account: such schemes include, for example, the UTII system provided for by Russian legislation.
It is worth noting that, in accordance with some financial analysis methods, revenue as an economically significant indicator can be reduced by taxes (in this case it is called “net revenue”).
A common approach according to which revenue is classified is:
- for cash receipts from the main type commercial activities firms;
- on proceeds from investments (for example, in the form of proceeds from the sale of securities);
- on revenue generated as a result of changes in exchange rates (for example, when exporting goods).
All three types of financial income are combined into total revenue. But, as a rule, business efficiency is assessed based on the income that is associated with the main activities of the enterprise.
A company's revenue can be calculated using two methods: cash and accrual. In the first case, it is recorded upon the fact that the enterprise accepts funds into its current account or cash register. In the second, it is calculated when the buyer of goods or consumer of services has obligations confirmed by contract or law related to payment for delivered products or services.
The main condition for receiving revenue from the main activity, regardless of the specific method of its calculation, is the sale of goods or services. Let's consider its specifics in more detail.
What is implementation?
This term corresponds to the direction of activity of a commercial enterprise, which is associated with the supply of goods or services produced or resold by it to the market. Actually we're talking about on meeting the demand generated by consumers. At the same time, the interaction between them and suppliers within the framework of sales may involve not only the actual purchase and sale of goods or services, but also, for example, the organization of their delivery (providing conditions for provision, if we are talking about services), storage, promotion available channels sales, etc.
The end result of the sale of a product or service is the receipt by the authorized person of payment for the deliveries made, which, in fact, forms revenue from the main activity (or, if we are talking about the cash method of recording income, this will be the buyer’s acceptance of obligations to pay for the product or service) . 
It may be noted that, in accordance with the legislation of the Russian Federation, the following cannot be recognized as sales, in particular:
- operations related to currency circulation;
- transfer of the company's resources to its legal successors as part of the reorganization of the business entity;
- transfer of company resources to non-profit organizations for non-commercial activities;
- transfer of investment property under a partnership agreement, as well as to mutual funds established in cooperatives;
- transfer of property within the framework of concession legal relations;
- transfer of resources of a business company to one of the participants upon his exit from the business;
- transfer of apartments to citizens as part of privatization;
- operations of seizure of property, handling of ownerless things.
Comparison
There is more than one difference between revenue and sales. This is due to the fact that these terms, although used, as a rule, in the same context, nevertheless mean different things.
Revenue is the flow of cash received by an organization as a result of commercial activities. However, it is not always related to sales. Revenue, as we noted at the beginning of the article, can be, in particular, investment income.
Implementation- this is the part of commercial activity that is most significant from the point of view of the company’s acquisition of revenue from its main type of business. It is almost always associated with sales of goods and services.
Having determined what the difference between revenue and sales is fundamentally, we will reflect the conclusions in a small table.
Profit and revenue are two different concepts, but they constantly accompany the activities of any company. Their meanings are quite close to each other, as they are often used in the same context. But there is a difference between them.
Revenue
Company revenue - cash receipt from the sale of goods, services or work on the market. It represents the result of the activities of the entire company over a certain period of time. In other words, revenue is called the company's gross income.
Revenue is reflected in accounting under account 90 “Revenue”, serves to determine the amount of tax paid by companies operating under a simplified taxation regime.
Revenue is the most general indicator of a company's performance. However, not everything can be considered revenue. As a rule, these are revenues from the main activity. When drawing up a balance sheet, revenue is taken into account minus indirect taxes, in particular VAT, which is actually withheld from the buyer.
Revenue can be forecast. Based on previous sales volumes and cash flows, the accountant can predict expected revenue in the next reporting period. The total revenue of the enterprise for the reporting period consists of:
- Revenue from core activities (sale of goods, provision of various services or performance of work);
- Revenue from investment activities ( financial results from the sale of non-current assets or the sale of any securities that belong to the company as a property);
- Revenue from the company's financial activities.
Profit
Profit is an important indicator of a company's performance. It can be economic and accounting.
Economic profit - the difference between the enterprise's total income and costs (explicit and implicit). This indicator shows how efficiently a company operated over a certain period of time. Economic profits can be distributed among the founders. Accounting profit is profit used for purposes accounting. Taxes are deducted from it, and it is reflected in the “Profit and Loss Statement”. It is equal to the difference between total income and the explicit costs of the enterprise.
The main profit of the organization consists of the following indicators:
- Profit (or loss) from core activities (sales of products, provision of services or performance of work);
- Profit (or loss) from auxiliary activities (for example, profit from renting out a warehouse or performing additional work under a contract).
The relationship between profit and revenue is that profit is the difference between total revenue and total costs of the enterprise. Profit can be negative (loss), while revenue is not.
Based on past performance, an accountant can predict future profits. To draw up such a forecast, it is necessary to take into account not only expected income (future revenue), but also expected expenses, as well as market conditions and projected changes in the market.
Few ordinary people will be able to answer the question of how income differs from profit. Both concepts mean the arrival of funds and the possibility of investing them in the future. How these indicators relate to revenue is also a mystery for the reader who is not savvy in economic matters. However, this oversight is easy to eliminate; just understand the terminology.
What is meant by the term "revenue"
The first is the difference between revenue and accounting (that is, explicit, calculated) costs.
Taking into account the economic costs, including the implicit costs associated with an alternative in conditions of limited resources, we will already talk about economic profit: revenue minus economic costs.
Let's look at an example. Since the head of a passenger transportation company at one time chose the path of an entrepreneur, rather than the path of an employee with savings in a bank, he faced alternative economic costs, for example, the following:
- savings in a bank account that were invested in business development - 60 tr.
- lost interest on money remaining in the bank - 6 tr.
- lost wage from hired work per year - 180 tr.
It turns out that the annual profit of 240 tr, which we calculated earlier, should be reduced by the amount of economic costs:
240 t.r. - (180 t.r.+60t.r.+6t.r.) = -6 t.r.
This business for an entrepreneur will not pay for itself in a year. If the company’s accountant congratulates the manager on his annual profit, the entrepreneur himself will assess the business’s performance as satisfactory.
Summary
Let’s summarize and answer the question of how income differs from profit, what is the difference between them and revenue, highlighting the main points briefly:
- Revenue and income are always positive economic indicators. Profit can be positive (the company is profitable), negative (the company is unprofitable) and equal to zero (the company is at the break-even point).
- Income includes profit, as well as costs for remuneration of employees of the enterprise and the social component of internal policy.
- Profit is a calculated indicator. It can take into account implicit economic costs. Income can always be calculated and entered into the balance sheet.
- Another difference between income and profit is the legal binding: commercial enterprises work to achieve profit, non-profit enterprises should not receive a profit at all, and municipal enterprises can be profitable, but subsidies only imply breaking even. All businesses can receive income.
Thus, revealing small terminological nuances of the profitable part of enterprises’ activities will allow readers to become more savvy in economic issues.
