Revenue vs. Profit

Difference Between Revenue And Profit

Revenue and profit are both economic variables. There is one key difference between them. Revenue represents the gross value of turnover. Its costs are not considered. On the other hand  in profit, costs of the output are considered. Profit is obtained by deducting all costs from the total revenue.

Revenue refers to the proceeds a company creates through the implementation of economic process i.e. the sum of money obtained from sale of goods or services. The Revenue is an economic variable which is measured by the financial performance (Such as money or credit of operation). The term proceeds should not be understood as synonymous with gain. The revenue is calculated by multiplying the quantity of the goods sold with unit cost:

Revenue = Quantity × Unit Cost

We can also obtain the revenue by adding up the expenses of the purchase of raw materials or production costs to gain:

Revenue = Expenses + Gain

In a commercial or financial activity gain can be calculated by finding the difference between the value (revenue) of the product or service and the cost of production or purchase of raw materials:

Gain = Revenue – Expense

So the gain represents the difference between revenues and costs of a company. It is the result of the financial statements of the income of a company or contractor. In reality, the gain can be defined in two different ways: the Gross profit from which costs and taxes must be deducted and net gain after the deduction of all costs.

 

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