8 DIFFERENCE BETWEEN REVENUE AND PROFIT

Although both profit and revenue are related to money, they have marked differences which will be explained in this post.

Revenue is the entire amount of money that a business makes through the sale of products and services that are related to its core business operations

It includes all income earned from the sales or supplies of goods and services sold by a business entity.

Profit, on the other hand, refers to the revenue earned by a business entity minus the cost associated with earning the revenue.

It is the difference between all income earned by a firm and expenses associated with making the revenue.

Differences Between Revenue And Profit

1. Profit is the income that is made after costs have been subtracted, whereas revenue is the income that is earned before costs are subtracted

2. While profit is calculated as revenue less cost, revenue is calculate by multiplying the price by the number of units sold.

3. A firm could earn revenue without making a profit, but a firm cannot earn profit without first earning revenue.

This is so because profit is impacted by cost but revenue is not. So, if cost is greater than revenue, profit will be negative.

4. Profit is always less than revenue, and revenue is always greater than profit.

Remember that we deduct revenue to earn profit

5. Profit is a subset of revenue, whereas revenue is the superset of profit.

6. Operating and non-operating revenue are the two types of revenue, whereas net profit and gross profit are the two types of profit

7.Revenue is at the top of the income statement because it is the first item listed, whereas profit is at the bottom of the income because it is the last item.

8. Revenue is shown in the trading account while profit is shown in the profit and loss account.

Tabular Comparisons of Revenue and Profit

FeaturesRevenueProfit
Calculated asPrice time quantity soldRevenue minus cost
Type of incomeIncome before deducting the costIncome after deducting the cost 
Relationshipsuperset of profitSubset of Revenue
Which is greater?Revenue is always greater than profitProfit is always less than revenue 
Where can it be found in the income statement?Revenue is usually the first item in the income statementProfit is generally the last item in the income statement.

To summarize, the major differences between revenue and profit is that the former is the income earned before costs are deducted while the former is income earned after cost are deducted.

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