Difference between revenue and profit

Difference between revenue and profit

Difference between revenue and profit

Or

Revenue Vs Profit

The basic difference between Revenue and Profit is that Revenue means the amount received or receivable or realised from sale of goods or services by the business in its ordinary course of operations whereas, Profit is the excess of total revenues over its related total expenses (costs) during an accounting period from the normal course of business activities (Operating activities) of a business enterprise.

What is  Revenue? 

Revenue means the amount received or receivable or realised from sale of goods or services.

Or

Revenue refers to the gross inflow of cash, receivables or other considerations, generated by the business in its ordinary course of operations.

Eexamples of Revenue-

1.Amount received  from sale of goods,

2.Interest received,

3. Dividend received ,

4. Commission received, 

5. Rent  received,

6.Royalty received etc.

Calculating revenue is very easy. Just use the following formula to calculate business revenue:

Revenue = Quantity in Units  x Sale Price per unit

Example- X copmany ltd. Sold 2,000 units of laptop, average price per laptop Rs. 35,000 calculate business revenue.

Revenue = 2,ooo  x 35,000

Revenue =  Rs.7,00,00,000

Revenue differs from income, Amount received against sale of goods and/or services rendered is revenue and cost of sale of goods and/or services is an expense. The difference between revenue and expense is income.

Income = Revenue – Expense

What is Profit?

Profit is the excess of total revenues over its related total expenses (costs) during an accounting period from the normal course of business activities (Operating activities) of a business enterprise.

Profit = Total Revenue – Total Expenses

Profit is divided into three categories:

1. Gross Profit

2. Net profit

3. Operating Profit

1. Gross Profit-

Gross profit is the excess of net sales over cost of goods sold.It is determined from the trading account.It does not include any income from other sources.

Gross Profit = Net Sales – Cost of Goods Sold

Net Sales   = Sales – Sales Return

Net Purchase  = Purchase – Purchase Return

Cost of Goods Sold = Opening Stock + Net Purchase +Direct Expenses – Closing Stock

Adjusted Purchase = Opening Stock + Net Purchase  – Closing Stock

Cost of Goods Sold = Adjusted Purchase + Direct Expenses

Gross Profit  = Net Sales – Adjusted Purchase- Direct Expenses

2. Net profit-

Net Profit is the profit earned through operating and non-operating activities of the business.

Net profit = Gross Profit + Operating Income and Non operating Income  – Operating and Non operating Expenses

3. Operating Profit-

Operating profit is the excess of operating revenue over operating expenses.

Operating Profit is the profit earned through normal operating activitics e business. It is calculated by deducting the Operating Expenses from the Gross Profit.

Operating Profit = Gross Profit – Operating Expenses

Or

Operating profit = Net Profit after Tax+ Non-Operating Expenses – Non Operating Incomes

Or

Operating profit =   Gross Profit + Operating Income(If any) – Operating Expenses

Table Showing Difference between revenue and profit

 

Basis Revenue Profit
Meaning Revenue means the amount received or receivable or realised from sale of goods or services. Profit is the excess of total revenues over its related total expenses (costs) during an accounting period from the normal course of business activities (Operating activities) of a business enterprise.
Formula Revenue = Quantity in Unit × Sale Price per Unit

 

Profit = Revenue – Expenses
Types 1. Operating Revenue,

2. Non-Operating Revenue

 

1. Gross Profit,

2 Operating Profit,

3.Net Profit

Position on Financial Statement Revenue is found at the top of the income statement.

 

Net profit is found generally the last line on the income statement.
Dependency on Each other Revenue not dependent on Profit. Profit dependent on Revenue.
Comparision Revenue is always more than profit. Profit cannot be more than revenue.

 

 

 

Also read : Format of Trading Account

Also read : Format of Profit And Loss Account

Also read : CAPITAL AND REVENUE EXPENDITURE

 

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