Nowadays, the concept of profitability is more relevant than ever. And if before income was a purely entrepreneurial concept, now we are all somehow connected with it.
In fact, income is the sum of cash receipts or material assets of a particular subject (individuals, legal entities or the state as a whole) for a certain period, which is the result of any activity permitted by law.
In addition, there is such a term as net income. There are a lot of opinions and opinions regarding the interpretation of this concept. Quite often, net income is defined as revenue, taking into account the deduction of all expenses from it. But in this case, it will already be profit.
In fact, this indicator is often confused with income, but in practice these are different concepts, and profit is just the end result of the enterprise. It is calculated as income from which all expenses and obligatory payments are deducted. In this case, we mean net profit.
What then is net income? This is all cash or material income, with the exception of some mandatory payments ( value added tax, excise duty), as well as other deductions from income. This calculation sequence can be seen in the statement of financial performance. But where, if not there, to look for the answer to the question of generating income and profit?
Consider these concepts as an example.
Let's say the company sold goods in the amount of X, which will make up its income. This is the first category. When the company deducts VAT from this amount, we will get Y, that is, net income. But when we subtract the
cost price (this, by the way, will be
gross profit), embezzlement for labor, delivery, transportation, maintenance of administrative staff, depreciation, income tax and other costs, we will get net profit. In fact, this is the amount of funds that can be disposed of, and from which nothing needs to be deducted. But if the waste exceeds income - it will be a loss.
Such an algorithm relates to financial accounting. In the tax system, everything looks a little different. Due to the fact that the income in it is any cash flow to the account, and in the financial accounting system - on the first event. That is, if the goods are shipped, then their sales value is displayed as income received, even if the buyer has not yet paid for the order. And if a prepayment for the goods has been made to the company’s account, but the latter has not yet been shipped, then the date of transfer of the funds will be considered as income.
If we talk about individuals, namely people who are not entrepreneurs, then income is the aggregate of all cash receipts (wages, additional part-time jobs, gifts, etc.). If we subtract deductions in the form of taxes and social funds from this amount, we will get a net income. And when we subtract the cost of food, transportation, clothing, etc. from this indicator, then there will remain (if you are lucky) the profit that can be deferred to obtain
additional income in the form of interest.