On this occasion we will discuss the Difference Between Income and Profit. Revenue is the income earned by a business entity through its daily operations, namely from selling goods or providing services to customers. On the other hand, Profit refers to the financial profit of the company i.e. when the amount earned from selling goods exceeds the amount spent on buying or producing goods; the result will be profit. There are two types of profit, namely gross profit and net profit.
If income is the backbone, then profit is the lifeblood of a business. The two must go hand in hand for the long-term survival, growth and expansion of the company. There is a direct relationship between income and profit, namely the higher the income, the greater the profit and vice versa.
Definition of Income
Revenue is the amount received by a business against the sale of goods and services and through the performance of other day-to-day operations. When profit is generated from sales, it is referred to as “Revenue”.
Revenue is the lifeblood of a business as it helps in meeting the fixed and variable costs of the company. It helps the company to run its business effectively and efficiently. Following are the types of Income:
Operating Income
generated from normal business operations is known as operating income, e.g. Sales.
Non-Operating Income
generated through other business activities that go hand in hand are referred to as Non-operating Income, e.g. Interest, Taxes, Dividends, Rent, etc.
Definition of Profit
Profit is the reward for the risk taken by an entrepreneur to run his business, i.e. the return on the investment made by him. It is essential for the growth and long term survival of any business, in fact the success of a business depends only on its profit generating capacity.
Profits can be obtained after deducting several expenses such as, trading costs, office and administrative costs, sales and distribution costs, taxes, interest, dividends, etc. Here are the types of profit:
Gross profit
Profit earned after deducting trading costs from Sales is known as Gross Profit.
Net profit
Profit earned after deducting office and administrative expenses, selling expenses and other expenses from revenue is net income.
- Revenue is the amount received by the business through various trading activities while Profit is the surplus that remains after deducting all types of expenses and expenses.
- Revenue is necessary to run a business efficiently and effectively. On the other hand, Profit is necessary for the survival and growth of the business in the long term.
- Revenue is not dependent on profit in any way, but profit is dependent on income. In other words, the more income, the more profit or profit.
Example
A company sells cars, so the amount received from selling cars is considered as revenue but if revenue exceeds production costs (i.e. Materials used, salaries, lighting costs, insurance, taxes, etc.) then it is called profit.
How to increase in Revenue:
- Offer a quality product at a reasonable price.
- Discount Offer.
- Spread knowledge about goods and services through advertising.
- Provide after-sales service.
- Give a discount.
- Expand the operating area.
- Charge a fair price.
Ways to increase Profit:
- Remove unnecessary expenses.
- Give less discount.
- Use an inventory control system.
- Avoid wastage
- Take discounts from suppliers.
- Increase prices wherever needed.
- Find new customers and markets.
- Add a new product line.
Conclusion: From the above discussion, it is quite clear that how the two terms Revenue and Profit differ from each other, but it is also true that profit comes from revenue. So for the success of any business, it is necessary that both should grow at the same time.
