Difference Between Income and Utility
Identifying the difference between income and utility is one of the simplest queries made by those who still do not understand accounting.
Well, income is the gross value of a company that gets over a period of time, which may be a month or a year. It can be the amount of all sales of goods and services made in a year. Utility, however, is income decreased by the costs and expenses. It is the result of the difference.
For revenue, it must incur certain expenses, costs and expenses incurred since the income must arise from an expense or an investment. Income does not arise from nothing.
For example, to sell a car for $ 30,000,000, we first need to buy a car that could well cost $ 25,000,000, so that the income for the company is 30,000,000, but its usefulness is only $ 5,000,000. Neither to mention the salary of the employees that sold the car, nor the payment for electricity, telephone, advertising, security, insurance, taxes, etc..
The utility is therefore the difference resulting after subtracting the revenue, all costs and expenses incurred in a period.
Utility is what the company actually earns, after subtracting the expenses from the income to determine the net value earned over a period of time.
Suppose a company that had a revenue of $ 1,000,000, in 2007, costs and expenses by $ 600,000 and $ 100,000.
In this case, the company posted a profit of (from 1,000,000 to 600,000 – 100,000) = 300,000
While the company reported sales of 1,000,000, net income, after deducting costs and expenses, was only 300,000.
In conclusion, income does not take into account the cats and costs incurred so that they can get, a useful , for this is the result of subtracting the value of revenues and costs incurred by the company in obtaining these income.