Wednesday, November 25, 2015

What is the difference between income and profit?

income - ()
profit - ()

Some people intend for the terms income and profit to have the same meaning. For example, the income statement was commonly referred to as the profit and loss (P&L) statement. When a company is profitable, we mean that the company has a positive net income.

To aid in understanding these terms, the word "net" is often added. Hence, we often see the terms net income and net profit. This communicates that the amounts are the remainder after expenses have been deducted. For example, a company's profit margin is often listed as the net profit margin (which is defined as the company's net income divided by its net sales). The word "net" also helps to distinguish a company's net profit from its gross profit, and its net profit margin from its gross profit margin.

Some people use the term income to mean revenues. For example, a bank or an individual will often refer to the interest they earn on bond investments as interest income or investment income. A retailer will refer to the sales of merchandise as revenues, but the revenues from secondary activities will be reported as other income ornonoperating income.

It is wise to keep in mind that different meanings are not unusual among people, businesses and countries.

What Is the Difference Between Net Income & Net Profit After Tax?

What is the difference between revenue and income?

revenue - (When analyzing a company's income statement, revenue is found at the top of the page. This is the number from which all calculations originate. Revenue is simply the total amount of cash generated by the sale of products or services associated with the company's primary operations, less any returns or discounts. It can also be thought of as net sales. For a grocery store, this includes the sale of anything found in the store, from vegetables to floral arrangements. )

income - (However, many companies also have alternate income streams from investments or the sale of other assets. These funds are not counted as revenue because they do not stem from the main business, so they are accounted for elsewhere in the income statement. However, in a financial context, the term income almost always refers to the bottom line, or net income.)



  • For a business, income refers to net profit i.e. what remains after expenses and taxes are subtracted from revenue. Revenue is the total amount of money the business receives from its customers for its products and services. For individuals, however, "income" generally refers to the total wages, salaries, tips, rents, interest or dividend received for a specific time period.

What is the difference between revenue and profit?

revenue - (Revenue is the total amount of income generated by the sale of goods or services related to the company's primary operations. If the company is a shoe retailer, the money it makes from selling shoes before accounting for any expenses is its revenue.)

profit - (This is called net profit, because it is the amount of income that remains after accounting for all expenses, debts, additional income streams and operating costs.)




  • Although the terms "revenue" and "profit" are sometimes used interchangeably, they mean different things on your income statement. Revenue is the money your business takes in from all sources. Profit is what remains after you pay all the bills. You can have strong revenue but still post a net loss if your cash outflows are greater than your inflows. The income statement discloses your revenue sources and your business expenses. By following how your expenses affect your revenue, you can find ways to cut your costs and increase your profit.

  • Revenue can most easily be thought of as the top line of an income statement or profit and loss statement. Revenue is the total amount of income generated by the sale of goods or services related to the company's primary operations. If the company is a shoe retailer, the money it makes from selling shoes before accounting for any expenses is its revenue. If the company also has income from investments or from a subsidiary company, that income is not considered revenue; it does not come from the sale of shoes. Additional income streams and various types of expenses are accounted for separately.