Difference between Revenue and Profit

Abstract:

Profit and revenue are both exceptionally solid marks of an organisation’s monetary prosperity. Since one utilise both, it is critical to comprehend their disparities to precisely survey one’s business’ funds. It’s critical to comprehend the contrast between profit and revenue, particularly while inspecting one’s independent company’s accounts. Thusly, to precisely deal with an organisation’s funds and make an adequate financial plan, one must really have to separate between the two.

While individuals frequently utilise these terms conversely, profit and revenue are two altogether different ideas. In this manner, utilising these terms reciprocally can prompt basic bookkeeping and planning botches or mistakes.

Meaning of Revenue:

Revenue is basically all the income or returns a business creates prior to subtracting some other costs. All in all, it is the cash an organisation gets in return for goods and services sold.

Revenue incorporates sales. Be that as it may, it can likewise incorporate things like rental income and income from interest. These income sources, however, are normally represented independently.

Meaning of Profit:

Though revenue is the income produced before costs, profit is the income earned that is left in the wake of deducting all costs. Costs or expenses can incorporate anything from taxes to inventory costs. It’s additionally called the net income or bottom line.

At last, profit is a piece of a business’s income. So in a perfect world, in the wake of deducting all costs or expenses as a whole, one will have income remaining that makes an organisation a beneficial or profitable business.

Difference between Revenue and Profit:

REVENUE

PROFIT

Meaning

Revenue is the product of the number of goods sold and the selling price per unit. We can also include other incomes as part of the revenue.

It is the amount left after deducting the expenses from the revenue.

Superset and Subset

Revenue is the blanket term of income or the superset of income.

Profit is the subset of revenue or the subgroup of revenue.

Dependence

The company’s lifeline is the revenue earned; otherwise, the company will be under loss.

Without the dependence by the company, there wouldn’t be profitable.

Location in the Financial Statements

Revenue is found in the income statement under the head of net sales.

Profit is found in the last line of the income statement.

The Formula for Calculation

Revenue = No. of units sold x Selling price per unit.

Profit = Revenue – Expenses.

Different Types

Revenues are of two types that are non-operating revenue and operating revenue.

Profits are of two types that are gross profit and net profit.

Frequently Asked Questions

What is revenue?

Revenue is the income that is created from an organisation’s center business tasks and exercises or business activities and operations. It’s additionally called the top line. Also, some call it turnover or sales.

What is the formula for calculating revenue?

The formula for calculating revenue is Revenue = Quantity Sale price
For example: If one owns a bakery and sells 100 loaves of bread in a month for Rupees 5 each, the revenue from selling bread would be Rupees 500.
Revenue = 100 x 5
= 500

What is profit?

Profit is the contrast between the sum acquired or earned and the sum spent in purchasing, working or operating, or creating or producing goods and services. At the end of the day, it’s the monetary profit of a business.

What is the formula for calculating profit?

The formula for calculating profit is: Profit = Revenue – Expenses
For example: let’s say a business’s monthly expenses for the month of October are Rs 3,150, which includes salaries, electricity, and all the materials, and the revenue is Rs 4,050.
Profit = 4,050 – 3,150
= 900

Hence, the profit for the month of October is Rs 900.

Also See:

Trading and Profit and Loss Account

Types of Errors in Accounting

What Are Non Current Assets

What Is Accounting Equation

What Is Current Liabilities

Leave a Comment

Your Mobile number and Email id will not be published. Required fields are marked *

*

*