The difference between turnover and revenue. In simple words about revenue, income and profit

Revenue is a key concept in business. This is an indicator of the activity of any enterprise. To determine it, a number of calculations are required. Many people confuse revenue with profit. However, these are different concepts.

The concept of revenue in simple words

Revenue– this is income from the company’s activities, the total amount of funds received for the performance of services or the sale of goods. Calculated over a specified period of time. Previously, revenue was considered a type of profit. However, this issue is now disputed by many experts.

IMPORTANT! The company's activities depend on the size of its revenue. It is the receipt of funds that is the result of the enterprise’s activities. If these funds are very small, the organization is considered unprofitable.

Why do you need revenue calculation?

This indicator is the most important concept in the company’s activities. Its calculation is carried out for the following purposes:

• Analysis of demand for services provided and goods sold. Based on the results of the analysis, the entrepreneur can draw up a strategic production plan and determine a procurement plan.
• Based on the amount of revenue, you can get an idea of ​​the economic success of the company.
• This is a key indicator of the company's performance. If there is no revenue, this is a sure signal that changes need to be made.
• Based on the revenue, the cost of the products sold is adjusted, and the circulation for which there will definitely be demand is determined.

The amount of revenue needs to be known, first of all, to the head of the company. But this information may be requested by business partners, creditors, and investors.

Revenue functions

The main function of revenue is to compensate for expenses, funds that were spent on the purchase of goods or on their production. Financial resources received from the activities of the enterprise are transferred to accounts. Timely translations are ensured by:

• stability of the company's activities;
• continuity of turnover of goods.

Typically, proceeds are spent on the following purposes:

• payment for services of suppliers;
• acquisition of products or materials for their production;
• payment of salaries to employees;
• payment of taxes;
• expansion of the enterprise.

That is, funds are usually invested in developing the business and maintaining its viability.

Delayed revenue receipts lead to negative effects:

• enterprise losses;
• decrease in profit indicators;
• payment of fines accrued for failure to meet deadlines for loan payments;
• violation of contractual obligations to business partners;
• inability to pay all bills.

The head of the organization must ensure uninterrupted receipt of revenue. Without regular and timely receipt of funds, a business cannot exist.

What may be included in revenue?

The indicator under consideration includes:

• the purchase price at which the products were purchased;
• added value that appeared during the sale of goods.

That is, revenue takes into account the full price of products sold.

Sources of revenue are:

• The main activity of the enterprise (for example, the sale of goods and the provision of services).
• Investments (working with securities, selling shares).
• Other financial activities (for example, receiving funds from a company in which the enterprise’s investments were previously directed).

The list of sources depends on the specific company and its type of activity.

Calculation example

The store sells washing machines for 5,000 rubles. 100 washing machines were sold within a month. The cost of household appliances is multiplied by the number of units sold. That is, the store’s revenue will be 500,000 rubles per month.

The amount of revenue must be indicated in accounting. This indicator is recorded in stanza 2110 “Revenue”.

IMPORTANT! Revenue is subject to tax, and therefore tax deductions must be subtracted from this value.

How is revenue different from profit?

Revenue represents the totality of funds received from activities. This value does not take into account the company's expenses. Profit is the difference between revenue and expenses. Expenses are understood as the costs of supporting the activities of the enterprise. Let's look at all the differences:

• Calculus. The amount of revenue can be zero or positive. Profit can take negative values.
• Compound. To obtain information about revenue, it is enough to know all the income of the enterprise from its activities. To calculate profit, you need to know not only the amount of income, but also the amount of expenses.
• Real expression. Revenue may be potential. For example, the company provides customers with the opportunity to arrange an installment plan. There may not be funds in the company’s account, but there is a guarantee that they will appear. Profit cannot be “virtual”. It is calculated based on actual values.
• Expression. Revenue is a definition that can be interpreted in a single meaning. Profit can be divided into two forms: gross and net. Net profit refers to the amount of income received after paying all taxes.

Profit and revenue differ significantly from each other in a key number of ways.

Example

The company sells phones for 1,000 rubles. We manage to sell 500 phones a month. Revenue is 500,000 rubles. The same company spends certain funds on its activities. They go to pay rent for the premises. Rental payments per month amount to 50,000 rubles. The company also has to pay salaries to its employees. In total, the salary will be 100,000 rubles.

First, you need to add up all the expenses. They will amount to 150,000 rubles. All expenses are deducted from revenue. The profit will be 350,000 rubles.

Can revenue be negative?

Revenue can be either zero or positive. If all of the company's income is missing, the value will be zero. This indicates that the company is not engaged in any activity. This feature is due to the fact that nothing is deducted from the revenue. If it is completely absent, then the company does not receive any funds at all.

FOR YOUR INFORMATION! But the profit can be negative. For example, a company sold goods worth 10,000 rubles, and the cost of renting an office is 20,000 rubles. In this case, the organization will lose 10,000 rubles.

Revenue is an important concept when running a business. Allows you to determine all the income of the enterprise. Gives an idea of ​​the demand for products or services, job stability. Based on it, prices for goods are set and their circulation is determined. It differs from profit in that nothing is subtracted from the indicator under consideration. Typically, funds from the proceeds go to the needs of the business and to ensure its smooth operation.

First of all, let's understand the meaning of such economic categories as revenue, profit and income.

At first glance they seem to be the same thing. But this is not true at all. To successfully start your own business, every entrepreneur must clearly understand the difference between these terms.

The mistake is that many novice entrepreneurs understand this word as everything received at the cash register. In retail sales, when the buyer pays for the goods upon receipt, this is what happens. But during mutual settlements between counterparty enterprises, the difference between payment for the product and its delivery to the buyer is revealed.

Revenue is the total amount of funds for sold goods sold that must be received by a business entity.

Income

This is an indicator indicating the difference between revenue received from the sale of services and.

Profit

This is the difference between income and the costs of obtaining it. Determines the effectiveness of work. Can be negative when costs exceed revenues.

Kinds

If we subtract the deductions associated with them from the sum of all income, we get the result. There is also a net one - what remains if all payments of the enterprise are removed from income:

1. Loans.
2. Fines.
3. Taxes.
4. Office rental.

How are revenue, income and expenses determined?

Two methods:

1st – charges “on shipment”. Indicators are calculated at the time of provision of services, performance of work or transfer of goods. This does not depend on payment. The most common method.

2nd – cash register, “on payment”. The indicator is determined when the calculation is made. Suitable for small cash-based organizations - retail stores. The disadvantage is the inability to control accounts payable and receivable. This happens because the receipt of funds is taken into account, but there is no accounting of the work performed by the enterprise, services provided or goods sold.

We examined the most significant performance indicators of any entrepreneur.

One of the main concepts used in economics and business is revenue. It is with this concept that the activities of most enterprises are connected. Depending on the revenue received, an entrepreneur can assess the demand for a particular product or service, resolve issues regarding the production and purchase of goods in his favor. It is believed that it is the size of profit that determines the success of an enterprise.

Basic definition

It would seem that revenue is the amount received during the sale of goods. But this is far from true, since it depends on a number of nuances and characteristics. Previously, revenue was attributed to one of, but now there is controversy surrounding this issue. Today it is considered income from the company’s core activities, but at the same time, other areas can also generate profit.

The basic definition is: revenue is the total amount of money received during a certain period of activity from the sale or provision of services. It can take either a positive value or be equal to zero, but it will never take a negative value.

Receiving revenue is the final stage in the work of any commercial organization. It is the main overall indicator of the performance of a company or firm. This indicator is planned first, and on its basis the price of the product and its circulation are set. Based on revenue, all subsequent types of profit and income are calculated, and conclusions are drawn about the demand for a particular product.

In the absence of profit, the company inevitably suffers losses, which ultimately leads to its ruin and closure.

Calculation methods

There are two main methods for calculating revenue. At the same time, each of them has a different concept of revenue:

• IN cash method This concept refers to the funds received by the seller of goods from their sale. In fact, this is the amount of payment that the seller received in cash or by non-cash payment. If the goods are released with a delay, the revenue is not recorded until the money arrives in the bank account of the seller or distributor. In this case, all advances received are treated as revenue.
• Method for determining revenue by accrual or shipment . It considers as revenue even those funds that were received in cash and will also be paid through credit or deferred payment. This method is often used in large companies.

Types of revenue

Revenue from the sale of products and services is funds received for products or services shipped to customers. Revenue of this type is divided into two types:

1. , which takes into account all funds received for a product or service. In the case of barter payment - the full cost of the exchange agreement. This amount includes not only taxes, but also various fees and duties, which are then paid to the state. The second name for this type of revenue that can be found is net revenue.
2. Clean is the difference between gross revenue, taxes and excise taxes. Recorded in the profit and loss statements of the enterprise. Net revenue is also called gross revenue. It is this that forms the main income of the enterprise.

Difference between basic concepts and definitions in trading

When carrying out actions related to the sale of certain things and products, employees have to operate with such concepts as revenue, income and profit. But you should understand the difference between each of these terms.

Net proceeds are often related to the concept of income. But income is a broader concept. Thus, income is considered to be an increase in economic benefits from the receipt of various funds and, as a result, an increase in the capital of the organization. But income can have several sources, not only revenue, but also payment of fines, sanctions, and interest from the bank. All this creates profit.

Money for the purchase of goods, taxes, payment of rent for premises, expenses for sellers. If you subtract this amount from the income received from the sale of goods and services, you can get a profit.

Naturally, revenue significantly affects the income and profit of an enterprise and is one of its main components, but equating revenue with these two concepts is fundamentally wrong.

Revenue components

Revenue consists of two main components:

• purchase price , that is, the cost at which the product was purchased for sale or the material for its manufacture;
• added value , that is, the amount that the seller adds to the purchase price in order to make a profit. This amount is often a percentage of the purchase price of the product.

Thus, if you subtract the cost of goods from revenue, you can get the amount of income received by the company in the course of its activities.

main sources

To date, revenue can be received from:

• main activity – sales of products, performance of work or provision of services. So, for a store it will be the sale of goods, for a law office it will be the provision of legal services;
• investment activities , which includes working with company shares, securities and even company assets not involved in trade turnover. For example, a large corporation may sell part of its shares in order to receive investment;
• financial activity of the enterprise . For example, the owner of an enterprise invests money in a particular project with the aim of making a profit, puts money on deposit in a bank, and so on.

If you add up the funds received in these three areas, you can ultimately get the total profit of the enterprise.

For example, profit from core activities is 920,789 rubles per month, investment activities - 34,000 rubles, financial activities - 265,000, therefore, the total profit for the month will be: 920,789 + 34,000 + 265,000 = 1,219,789 rubles.

In accounting, this concept refers to funds received from the main activities of the company, while the remaining funds are usually called “other income” or “interest income.”

Main functions

The main function that revenue performs is to reimburse the funds spent by the company on the purchase or production of goods. Its timely receipt into the company’s accounts ensures not only the stability of its work, but also the continuity of trade turnover and the company’s activities.

With the help of the proceeds received, bills of suppliers, both goods and materials, wages, and taxes are paid. In addition, the proceeds received can be used to purchase new goods or materials or expand the company’s activities.

If revenue arrives late, the company's activities suffer losses, as its profits decrease, penalties may be imposed, or contractual obligations related to the production of goods or payment of certain bills may be violated.

Revenue calculation

Quite simple formulas are used for calculations. It is enough to know the volume of products sold over a certain period of time and the unit cost, then multiply them. Next, the obtained values ​​for each group of goods are summed up. It is worth noting that funds received during the operation of the enterprise are not included in revenue.

The formula looks like this:

TR = P * Q, where

TR – revenue, rub.;

P – price, rub.;

Q - sales volume, units/pcs.

For example, let's calculate the revenue of the Vesna store from the following products:

• Tea - 23 packages sold, each cost 105 rubles.
• Sugar – 3 kg, 40 rubles each.
• Lemon – 1 kg, cost – 200 rubles.
• Revenue for tea was – 23*105 = 2415;
• Revenue for sugar – 3*40=120;
• Revenue per lemon – 1*200=200.

The total revenue of the store for this group of goods was 2415 + 120 + 200 = 2735 rubles.

If a product was initially sold at one price, and then its value increased, then revenue is calculated for each product depending on its cost, and then added up.

For example, at the beginning of January, 120 packs of tea were brought to the Solnyshko store for 105 rubles, and in February another 76, but with a cost of 110 rubles. At the same time, there are still 20 packs of tea left in the store at the old price.

Within a month, the remaining 20 packs and 34 packs from the new batch were sold. Thus, the revenue for the sale of tea in February will be: (20*105)+(34*110)= 2,100 + 3,740 = 5,840 rubles.

The data obtained during the calculations is considered information for internal use and is not included in the financial statements.

However, once a quarter or a year, these indicators are calculated by an accountant and recorded in the “Profit and Loss Report”. In this case, the amount of revenue without indirect taxes and VAT is indicated (see also). Besides , in some cases, the amount received during the sale may not entirely belong to the company. For example, when selling consignment items, the seller receives proceeds from the buyer, the main part of which belongs to the owner of the goods.

For example, the Solnyshko consignment store accepted the following items for sale with the proviso that the people who provided them or the consignors would receive the following amounts:

• Children's chair - 450 rubles.
• Manege - 890 rubles.
• Kangaroo – 500 rubles.

The store sellers also added a 20% markup on the goods, that is, the final cost of the items was: 540, 1068 and 600 rubles, respectively. After the sale of these items, the profit of the Solnyshko store was:

(540+1068+600) – (450+890+500) = 2,208 – 1840 = 368 rubles. The remaining amount, according to the previously drawn up agreement, will be received by the principals.

The reports prepared by the accountant are provided to the company's management. Based on them, conclusions are drawn about which goods are in greater demand and which are in less demand. Consequently, this helps to shape the volume of purchases of a particular product.

Video: Revenue and profit

From the video lesson you will learn what revenue is and how to calculate its main types: total, average and marginal. In addition, the lesson also talks about profit, the main factors of its formation and its impact on the development of the company.

Learning is the funds received during the sale of goods or services. Thanks to revenue, you can draw conclusions about the work of the enterprise and adjust its activities. A delay in the receipt of revenue leads to losses for the enterprise, and its absence leads to its closure.

The activities of a commercial organization can be characterized by its revenue and sales. What is their specificity?

What is revenue in a business?

The revenue of a commercial enterprise is usually understood as the amount (or a list of property in value terms) that it received as a result of sales or provision of services within a certain period of time. Based on the difference between revenue and expenses (and sometimes only on the basis of the value of the first indicator), the amount of taxes that the company must pay to the state is determined. The exception is the taxation mechanism, in which the corresponding cash receipts to the enterprise account are not taken into account: such schemes include, for example, the UTII system provided for by Russian legislation.

It is worth noting that, in accordance with some financial analysis methods, revenue as an economically significant indicator can be reduced by taxes (in this case it is called “net revenue”).

A common approach according to which revenue is classified is:

• on cash receipts from the main type of commercial activity of the company;
• on proceeds from investments (for example, in the form of proceeds from the sale of securities);
• on revenue generated as a result of changes in exchange rates (for example, when exporting goods).

All three types of financial income are combined into total revenue. But, as a rule, business efficiency is assessed based on the income that is associated with the main activities of the enterprise.

A company's revenue can be calculated using two methods: cash and accrual. In the first case, it is recorded upon the fact that the enterprise accepts funds into its current account or cash register. In the second, it is calculated when the buyer of goods or consumer of services has obligations confirmed by contract or law related to payment for delivered products or services.

The main condition for receiving revenue from the main activity, regardless of the specific method of its calculation, is the sale of goods or services. Let's consider its specifics in more detail.

What is implementation?

This term corresponds to the direction of activity of a commercial enterprise, which is associated with the supply of goods or services produced or resold by it to the market. In fact, we are talking about meeting the demand generated by consumers. At the same time, the interaction between them and suppliers within the framework of sales may involve not only the actual purchase and sale of goods or services, but also, for example, the organization of their delivery (providing conditions for provision, if we are talking about services), storage, promotion through available channels sales, etc.

The end result of the sale of a product or service is the receipt by the authorized person of payment for the deliveries made, which, in fact, forms revenue from the main activity (or, if we are talking about the cash method of recording income, this will be the buyer’s acceptance of obligations to pay for the product or service) .


It may be noted that, in accordance with the legislation of the Russian Federation, the following cannot be recognized as sales, in particular:

• operations related to currency circulation;
• transfer of the company's resources to its legal successors as part of the reorganization of the business entity;
• transfer of company resources to non-profit organizations for non-commercial activities;
• transfer of investment property under a partnership agreement, as well as to mutual funds established in cooperatives;
• transfer of property within the framework of concession legal relations;
• transfer of resources of a business company to one of the participants upon his exit from the business;
• transfer of apartments to citizens as part of privatization;
• operations of seizure of property, handling of ownerless things.

Comparison

There is more than one difference between revenue and sales. This is due to the fact that these terms, although used, as a rule, in the same context, nevertheless mean different things.

Revenue is the flow of cash received by an organization as a result of commercial activities. However, it is not always related to sales. Revenue, as we noted at the beginning of the article, can be, in particular, investment income.

Implementation- this is the part of commercial activity that is most significant from the point of view of the company’s acquisition of revenue from its main type of business. It is almost always associated with sales of goods and services.

Having determined what the difference between revenue and sales is fundamentally, we will reflect the conclusions in a small table.

Revenue is an indicator of financial well-being, obtained by selling services and products over a certain period of time. Its purpose: reimbursement of financial costs that were spent on the production of products or the operation of a number of services (transportation, storage, delivery, rental of premises).

The purpose of the definition of “revenue” in the field of small, medium and large businesses:

• payment of additional expenses (fuel, utility bills, purchase of spare structures);
• supplier services;
• issuing wages to employees of a company or firm.

Reference! The efficiency of business activity depends on the volume of revenue. This means that if a company does not receive a significant amount of funds from the commodity circulation chain, then the enterprise can be regarded as unprofitable or bankrupt.

We talk about the reasons why revenue volumes may be low and what to do in such cases.

The source of revenue financing depends on several components:

1. sale of goods or provision of services;
2. financial result from the sale of valuable assets;
3. monetary contribution to the development and sale of the product.

It is possible to calculate revenue using one of the accounting calculations:

• Cash method. It involves calculating revenue from funds received into the company’s account in order to pay for products.
• Accrual method. Used in the presence of consumer obligations to pay for the services and products of the enterprise.

You will find a more detailed definition of the term “revenue”.

Definition of the word "turnover"

The definition of the word “turnover” in the field of entrepreneurial activity means the circular movement of funds in cash and non-cash methods for services provided by an enterprise (sale of goods and services). Cash turnover is a transaction of funds between legal and physical representatives.

Purpose of cash turnover:

Non-cash turnover of financial assets is the transfer of funds from the payer’s account to the recipient’s account. For non-cash transactions, business owners open current accounts in the banking system for the purpose of independently distributing funds.

Important! The funds are paid by the banking system by decision of the Russian government within the agreed time frame specified in the loan agreement.

The current account gives the owner the rights:

• receive incoming funds from the payer;
• withdraw funds upon request.

Successful financial turnover of entrepreneurial activity consists of two fundamental components:

• commodity settlement for the sale of a product between companies;
• payment transactions not related to the product: payment of wages, interest on taxes.

Turnover is the amount of funds collected during the period of sale or operation of services. The final volume of gross funds can be determined by subtracting the difference between the amounts invested in purchases + the volume of goods sold.

What is “trade turnover”?

Trade turnover is the process of movement of products according to the “producer-consumer” algorithm. He can be:

1. wholesale– purchase of products for the purpose of developing retail trade;
2. retail– delivery of goods directly to the customer without overpayments.

The successful implementation of a company’s turnover depends on a number of factors:

Trade turnover is often carried out according to the “Fifo” principle. Its essence lies in the fact that the goods received from the enterprise to wholesale buyers go through a processing stage - the establishment of their own pricing policy, in other words, mark-up, caused by a feeling of distrust or stinginess towards the product on the part of the consumer. This position is caused by the following factors:

1. low pricing policy = catch;
2. inflated prices = hole in wallet.

It is possible to measure the performance of the “turnover” parameter by analyzing supplies:

• low level: limited product that is not in demand;
• high level: fast sales and delivery of goods; purchase of products in advance by consumers.

Is one concept different from another in some way or not?

So what is the difference between all these definitions? Below is a comparative table of differences, an entrepreneurial chain of related concepts for successfully running a business:

Revenue is a central concept when running small, medium and large businesses. Its goal is the same everywhere:

1. control of all enterprise income;
2. analysis of demand for the products or services provided;
3. formation of a holistic picture of the stability of the enterprise.

Based on it, the manufacturer indicates the pricing policy and the volume of goods produced. Its main difference in comparison with turnover and turnover is that not a single component is subtracted from the taken revenue indicator. It is designed for business development and correct operation without supply disruptions.