Revenue Vs Profit

Revenue Vs Profit

Revenue Vs Profit

Revenue Vs Profit
Revenue Vs Profit

Revenue?

Revenue is the total amount received or receivable or realized from the sale of goods or services.
Or
Revenue means the amount of the business earned by selling its products or providing services to customers. Revenue can be operating as well as non-operating.  For example-

  1. Amount received from the sale of goods
  2. Rent received
  3. Commission received
  4. Interest received
  5. Dividend received
  6. Royalties received
  7. Amount received from rendering services

Operating revenue- Operating revenue is the revenue that a business enterprise generates from its primary business activities.

Non-Operating Revenue- Nonoperating revenue is the revenue earned by activities other than the primary activities of a business enterprise. 

Profit?

The excess of revenues over its related expenses during an accounting year is profit.
Or
Profit is the excess of total revenues over total expenses(costs) of a business enterprise for an accounting period.

Profit = Revenue – Expenses

Normally profit categorized as-
1. Gross Profit
2. Net Profit
3. Operating Profit
4. Revenue Profit
5. Capital Profit

1. Gross Profit- Gross profit is the difference between Net revenue from operation over the cost of goods sold (COGS). Gross profit, also called gross income, is calculated by subtracting the cost of goods sold from(sales- sales return) net revenue.

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        

2. Net Profit- The net profit is the excess of revenue over expenses during an accounting year.

Net Profit  = Gross profit + Other Income   – Indirect Expenses 

3. Operating Profit- Operating profit is the excess of operating revenue over operating expenses. Operating profit is the profit earned purely through the normal operating activities of the business concern. 

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

Or

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

4. Revenue Profit- Revenue profits are the profits that are earned in the normal course of business.
5. Capital Profit- Capital profits are the profits that do not arise from day to day operations of the business. Examples:

(i) Profit on sale of fixed assets.
ii) Premium received on issue of shares/debentures
(iii) Profit on re-issue of forfeited shares
(iv) Prior incorporation profits etc. 

Revenue Vs Profit
Revenue Vs Profit

Revenue Vs Profit

The basic difference between Revenue and Profit is that Revenue means the amount received or receivable or realized from the 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.

Table Showing Difference between revenue and profit

The difference between Revenue and Profit has been made on the following basis:

  1. Meaning
  2. Formula
  3. Types
  4. Position on Financial Statement
  5. Dependency on Each other
  6. Comparision

 

Basis Revenue Profit
Meaning Revenue means the amount received or receivable or realized from the 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 is not dependent on Profit. Profit is dependent on Revenue.
Comparision Revenue is always more than profit. Profit cannot be more than revenue.

 

Also read: P/V Ratio Formula

Also read: Classified Balance Sheet

Also read: Golden Rules Of Accounting

Golden Rules Of Accounting MCQs with solved answers

 

 

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