In order to start your own business and develop it into a powerful profitable structure, you need to correctly calculate the business plan, think through ways to obtain stable accounting profits and constantly analyze the company’s performance. This rule applies to startups in any form.

You can find out the full details at the tax office at the place of registration (residence address of the future entrepreneur).

Accounting profit - what is it?

Accounting profit (total gross profit) is a positive financial result from the operating and non-operating activities of an enterprise. Such indicators are calculated for each reporting period and reflected in accounting and tax accounting. The main ideas for obtaining economic profit are saving and increasing capital - stabilizing the welfare of the company's owners and increasing the value of assets (all material assets that the enterprise has).

In accordance with the first idea, profit is defined as the increase in the amount of money invested by the owners of the enterprise during the reporting period (that is, it is the amount that can be spent without encroaching on a change in the amount of capital - according to the idea of ​​Adam Smith). This idea of ​​profit is based on the difference between assets and liabilities - a company receives income only when assets increase or liabilities decrease. That is, profit is an increase in the size of the company’s resources, and loss is a decrease.

The second idea is based on the definition of accounting profit as the difference between income and expenses. Profit is the result of the correct distribution of revenue and costs for a particular reporting period. That is, income is recognized as assets, and expenses are recognized as liabilities, even if they relate to future periods. This idea formed the basis for the creation of the double entry method in accounting, which makes it possible to determine a double financial result (statistical and financial balance). In practice, the first method is used more often, and profit is determined based on changes in the amount of assets and liabilities. Indicators of different types of profit are reflected in other organizational and legal forms of the enterprise.

Formula and example of calculating accounting profit

Accounting profit is the difference between gross income and basic costs and is calculated using the following formula:

Pb = Dv – Iv, where Дв – gross income, Ив – external costs.

Gross income is defined as the difference between sales revenue and the costs required to obtain it. External costs are expenses associated with the production of goods (raw materials, materials and components, wages with deductions, interest on loans and borrowings related to production, etc.).

Economic costs consist of internal (use of own resources) and external costs (costs of purchasing raw materials, semi-finished products, labor, energy, etc.). Accounting costs (expenses) include only external costs, therefore the accounting profit on the balance sheet of an individual entrepreneur or legal entity is the difference between total sales revenue and the costs of materials and wages, and other external costs.

Accounting profit is also called accounting profit, economic profit is called net economic profit. When using the formula for calculating book profit, you must also take into account the following elements:

• net income - gross profit from the sale of goods, work performed, services provided - Pr;
• profit from the sale of the company's fixed assets (industrial buildings, equipment, special vehicles and other means of labor that are repeatedly involved in production processes) - Pi;
• profit from non-operating activities (income from operations that are not the main activities - rental of fixed assets, income from financial investments, etc.) - PVO.

Thus, the formula for calculating gross profit is obtained: Pb = Pr + Pi + Pvo.

The profit calculation formula is necessary not only for assessing the performance of operating activities, but also for the correct preparation and payment of mandatory taxes and fees. Individual entrepreneurs using the simplified taxation system (STS) must reflect their income in the book of income and expenses.

Accounting profit planning

The efficiency of the enterprise and the prospects for its development and increase in the value of assets directly depend on the correctness of profit planning. This process consists of constructing forecasts and distribution of accounting profits, as well as ways to optimize and increase them in the long term.

If prices for products or services are stable, then forecasts are made for 1 year; for seasonal goods or products with unstable demand, the income planning period is chosen to be half a year or a quarter. When forecasting profits, it is necessary to take into account the company's long-term goals. Planning uses direct counting methods, the analytical method, and the operating leverage method (the ratio of two different quantities, when one of them changes, the other quantity changes significantly).

How to increase accounting profit?

In order to properly manage the financial performance of an enterprise or the assets of an individual entrepreneur, it is necessary to take into account those factors that influence its positive results.

The main factors influencing the increase in the accounting profit of an enterprise are divided into:

• Internal.
• External.

Internal factors influencing the profitability of general economic activities include the quality (professionalism) of management, the level of competitiveness of products, the efficiency of planning all processes in the enterprise, the degree of organization of production processes and the smooth functioning of the sales system, equipment capacity, labor productivity, etc.

External factors are those circumstances that cannot be influenced by the owner and employees of the company. These are legislative restrictions in the industry, government policy for regulating prices and working conditions, natural phenomena, depreciation standards (the process of transferring parts of the cost of fixed assets as they wear out to the price of finished products), the price level for raw materials and other resources involved in the production of goods, provision of services.

When using any other method of accounting for financial results, it is necessary to constantly analyze internal factors that influence the performance of all areas of the company’s activities.

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Accounting profit is calculated using the formula for deducting external costs from sales profit. This indicator makes it possible to evaluate the effectiveness of the economic and financial activities of the enterprise, affects the stabilization of income and the increase in the value of the company’s assets. Profit calculation is needed to analyze the company’s performance and to calculate the amount of mandatory taxes and fees.

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Today, the concept of accounting profit is a relevant indicator for both large enterprises and private entrepreneurs. The final result in any business depends on how correctly this indicator is calculated. The stability of the enterprise directly depends on the financial result.

What is accounting profit

- this is the total income of the organization for the past period, implying a positive financial result, which is calculated for the past period, minus all expenses incurred for the production and sale of products. Accounting statements are usually prepared quarterly and for the year as a whole. In this case, all business transactions carried out at the enterprise are taken into account.

The concept of accounting profit contains two basic principles:

1. Saving capital – a principle based on increasing the welfare of the enterprise as a whole. In other words, the accounting department keeps records of funds that are an emergency reserve for the enterprise and are not wasted unless absolutely necessary.
2. Capital building - a principle that involves increasing the capital of an enterprise. Here is a comparison of cash inflows and outflows. Based on these indicators, the accountant makes a conclusion about the advisability of adjusting the activities of the enterprise.

To improve the results of enterprise development, in practice, as a rule, both principles are used.

Let's consider what the essence of accounting profit is. Any enterprise receives for a certain period of time. If it does not exist, the company may go bankrupt. The manager must know what income and expenses are generated in his organization in order to compare them and identify the financial result. There are two types of profit: accounting and economic, which have significant differences between themselves. To obtain an overall picture at the end of the reporting period, it is necessary to calculate these indicators as a whole.

What is the difference between accounting and economic profit?

Accounting profit is calculated simply. They take all the income of the enterprise for the reporting period and subtract the expenses that go towards the purchase of raw materials, production and marketing of goods or services. But this has its drawbacks. With this calculation, it is not always possible to accurately compare results and profit indicators. Inflationary losses are not taken into account. Accounting profit cannot accurately predict how changes in capital will occur in an enterprise over time.

Accounting profit is calculated on certain approved forms. Subsequently, this data is provided to the tax authorities for verification.

Calculating economic profit gives a more accurate financial result. It is also calculated by the difference between income and expenses, but other financial transactions are also taken into account. This is the profitability of an enterprise, which reflects the degree of efficiency of all resources, the cost of investment, and income from investment activities. Based on economic indicators, you can most accurately assess the efficiency of the enterprise as a whole and determine how stable it is.

Example of calculating accounting and economic profit (video)

Let's watch a short video where, using the example of a restaurant business, accounting and economic profits are calculated.

Formula for calculating accounting profit

The amount of accounting profit is calculated as the difference between revenue from sales of products, goods or services and the external costs of the enterprise. Let us introduce the following notation:

BP = B – VI, where

BP – accounting profit;

B – sales revenue;

VI – external costs.

External (explicit) costs - This is payment for resources that are not the property of the enterprise. This may include the costs of paying employees, purchasing raw materials and materials, paying for rented premises, depreciation of fixed assets and utilities.

Economic profit , differs from accounting. It is calculated as the difference between revenue from sales of all products and economic costs, which consist of explicit and implicit (external and internal) costs.

EP = B – EI, where

EP – economic profit;

B – sales revenue;

EI – economic costs.

Internal (implicit) costs – These are the costs associated with the use of all resources owned by the enterprise. This indicator is associated with lost profits. For the manager of an enterprise, these are expenses incurred to pay for the labor of personnel servicing production. If the employer could do all the work himself, there would be no need to make such expenses.

Capital owners invest their funds in business development, thereby incurring certain losses. If, for example, free funds are invested at interest, they will begin to generate income. Financial losses here are calculated as the lost percentage of the investment. For entrepreneurs who own real estate, the cost is rent.

Factors affecting profit

Thus, we can identify the main factors that influence increasing the profitability of an enterprise. They are divided into two types:

1. Internal factors , which influence the amount of profit by increasing the volume of products produced, selling them, improving them, increasing prices and reducing costs.
2. External factors, which do not depend on the operation of the enterprise and practically do not affect the amount of profit.

• level of business activity;
• labor productivity at the enterprise;
• quality and competitiveness of products or services;
• professional qualities of managers and specialists;
• level of enterprise efficiency;
• planning and forecasting financial results.

• production factors showing the availability and use of labor and financial resources in production;
• non-production factors related to the sales and supply function, social conditions of work, and environmental measures.

Production factors are divided into two subspecies:

1. extensive , which affect the extraction of profit in quantitative terms: financial resources, number of employees, equipment operating time, working time fund;
2. intensive that have an impact on the profitability of the enterprise in qualitative terms:

– modernization of equipment and increase in its productivity;

– programs to increase capital turnover;

– increasing labor productivity by increasing the level of education of management and specialists;

– improvement of labor organization in production;

– reducing the labor intensity of products;

– effective application and use of financial resources.

External factors , affecting the increase in profits:

• economic situation on the market;
• prices for purchased raw materials, materials for production;
• fuel and electricity prices;
• deductions for depreciation;
• state pricing policy, taxes, penalties and benefits provided under labor legislation;
• Natural resources.

In order to find out how the listed factors influence, you need to understand what the cost of production is. The cost of a product, work or service is the valuation of all the costs that went into its production. This includes labor resources, raw materials and materials, fixed assets and natural resources.

Note! When carrying out activities at an enterprise, external and internal factors are in close relationship with each other, and have a direct impact on the value of production costs, and therefore profits, revealing how rationally and economically material resources are used in the enterprise.

Planning

One of the main components of the efficiency of an enterprise and obtaining high profits is financial planning, which is carried out several years in advance. The planning period can be from 3 to 5 years, if there is economic stability. In this case, first they draw up a plan for the quarter - short-term planning , then for a year - current planning . Based on these indicators, planning for the future is formed.

Note! First, a comparative analysis of profit before tax and profit from sales of products or services is carried out, and sales volume is calculated. After this, a program is developed based on previously concluded agreements. The production program serves as the basis for calculating the required amount of raw materials.

In addition, labor costs are recorded: tariff rates, payment of wages, transfer of the unified social tax.

As a result of all the calculations made, it is predicted cost price products or services taking into account the balances of finished and unsold products in the warehouses of the enterprise.

Additional Information. The decisive point is the preparation of estimates for administrative and commercial expenses associated with maintenance and production management, promotion of goods and services to the sales market. The total amount may include intermediary payments.

Based on the above calculations, the planned profit from the sale of products or services of the enterprise is formed.

Nowadays, as the unemployment rate increases, more and more people are starting to work for themselves. Not every entrepreneur understands what accounting profit is and how to calculate it correctly. As a result, there is a risk of losing your business. To effectively develop your business, the company must have a professional accountant.

In the case of competent implementation of entrepreneurial activity, any organization makes a profit. In the absence of such an effect, the enterprise is considered unprofitable and unprofitable. The movement of monetary assets is taken into account using different methods. Any owner closely monitors the progress of his business model and clearly monitors the flow of cash investments. For this purpose, income and expenditure of assets are controlled. Depending on the specific case, significant differences may arise between economic and accounting profits. What is meant by these two types? What is the specific mechanism for calculating indicators? What role do material costs play in an organization?

Mechanism for determining economic profit

From the height of entrepreneurial activity, profit will be a consequence implementation processes. The level of such sales may concern both the products themselves and services. The measuring equivalent of profit is the generally accepted monetary unit in a particular state. Payments between counterparties can be made for other goods, semi-finished products, discounts and additional preferences in trade relations. The forms of such cooperation are divided into two types of profit

Fundamental differences between accounting and economic forms of profit

The type of profit from an accounting point of view is the simplest. The resulting value is a consequence of arithmetic calculations based on the total money supply and gross expenses. These actions are carried out throughout the entire business activity (warehousing, production and sale of the final product). Accounting profit is total revenue minus expenses. Carrying out such calculations has certain disadvantages:

1. A variety of methods for calculating indicators can lead to the formation of a factor of incompatibility of results for further calculation.
2. Inflation has a significant impact on the final analysis of business activities. It is difficult to view an organization's profit through the prism of different periods of time.
3. Gross output and the dynamics of changes in capital are quite difficult to display when analyzing accounting profits.

Gross output is a reflection of all products and services in monetary terms that an enterprise receives as a result of economic activities. A clear example would be both the rental fee for special equipment/equipment and the sale of finished products.

An enterprise's expenses represent paid obligations. They consist of a fund for paying employees, renting facilities, using the services of utility departments, treating staff, taxes and other unforeseen costs. Thus, by taking all the cost parts from the consolidated amount of income, you can clearly determine the accounting type of profit. Many commercial directors practice reinvestment mechanisms and dividend payments.

What underlies the company's economic profit? This is a mathematical substance that covers all aspects of an organization's activity. The principle of arithmetic operations is similar to the accounting type. Gross income and expenses also appear here, but absolutely all financial transactions will need to be taken into account. A whole system of indicators (profitability, cost of invested capital, return on investment) is designed to analyze business activities in detail and adjust management decisions in one or another segment of relations. The model of stable growth of an enterprise requires systematic monitoring of operational efficiency and assessment of risks and crisis situations. Dividing indicators into calculated and analytical allows for a gradation of accounting into tax and accounting.

A distinctive feature of accounting and economic profit is calculation methodology. The mechanism does not allow for all forms of costs to be provided for. In this case, accounting profit will be determined according to the established algorithm of incoming funds and all expenses. All departments of the executive branch and judicial bodies operate according to this principle.

Economic profit gives clear answers to the realities of the economic activity of the subject. The information concerns not only the numbers on documents, but also takes into account the actual state of the business model. Simply put, the economic type of profit takes into account total revenue, external costs (payments for services to contractors) and internal ones. And the accounting form of calculation takes into account only income and external costs (costs).

Understanding Profit in Commerce

The entrepreneur monitors this indicator every day. The essence of the economic concept consists of a large number of measures that prevent employee negligence, fraud and non-compliance. This is the only way to achieve the desired savings in assets and costs. Costs may include information that is located outside the accounting area. Unofficial expenses are the realities of today's business model. A striking example is lost profits that could have been received as a result of certain circumstances. Bonuses, travel allowances, hiring additional employees and much more.

Analysis of the activities of any business entity is carried out using two approaches, which are conventionally called economic and accounting. The second is based on an analysis of the costs that are included in the financial statements. For economic analysis, not only the totality of real reporting indicators is used, but also alternative costs, that is, benefits that are recognized as lost.

Features of terminology

Accounting costs refer to actual payments made that are included in the documentation. If accounting costs are subtracted from the income received, then this will already be a calculation of accounting profit. Next, it is necessary to subtract taxes and other mandatory payments from it, which results in net profit, and it serves as a reserve source of financing and is taken into account by the tax authorities.

If accounting and economic profits are calculated, then it is worth knowing that economic costs, in addition to accounting ones, include implicit or internal ones, that is, resources available to the entrepreneur. These internal costs are estimated based on the possibilities of alternative uses.

For example, an entrepreneur can use his car for production purposes. Economists are convinced of the need to take into account such costs, but accounting cannot do this, since there is no fact of payment from someone to someone. This is not reflected in accounting in any way. Economists may be of the opinion that the car could be used differently, for example, an entrepreneur has the opportunity to rent it out, for which he will receive a rent. Therefore, economists recognize lost rent as internal costs.

Characteristics

So, if accounting and economic profits are considered, then it is worth noting that the latter personifies the difference between income and economic costs. To reduce the difference between economic and accounting costs, it is necessary to record costs in accounting as accurately as possible, although usually this difference cannot be reduced to zero. But even when economic profit is less than accounting profit, and even tends to zero, the entrepreneur will still continue to operate, receiving accounting profit.

Historical development

Back in the 19th century, accounting and economics were considered different, and then a rather strong difference between them was already obvious. It was then that he developed the first indicator of economic profit. It was defined as the difference between net income and the cost of capital of the owner, and all this was called residual income. Although the calculations seem simple, in practice it turns out that it is necessary to find a whole array of information necessary for this.

Alfred Marshall's main emphasis was on the fact that when determining the value generated by a company at a particular point in time, it is necessary to take into account not only the costs that are reflected in the accounting documentation, but also the opportunity costs associated with raising capital.

For a long time, Marshall's developments were unclaimed, and the value of economic profit was not so great. However, in the 80s of the last century, with the beginning of globalization, developing countries began to consider different types of profit: accounting and economic. They are used to demonstrate alternative indicators of the company’s performance in order to attract more and more new investors.

Economic profit

It was she who acted as one of the indicators through which new partners are attracted to business. It assumes that additional value of invested capital will be created only when the amount of real income exceeds the opportunity cost of using this capital. The definition can be simplified as follows: economic profit exists only if the resulting financial result actually exceeds all alternative uses of the capital in question.

How to use the technique?

So far, the formation of the enterprise’s profit is reflected only in the accounting documentation. Economic profit has not taken root in domestic calculation practice, and there are several reasons for this. First of all, we are talking about ignorance of how to use this concept in decision-making by management personnel. Everyone is accustomed to analyzing accounting profit, so the activity of an enterprise is considered only through the prism of this factor. And those companies that decide to use this method are faced with the task of adapting economic profits to tax and accounting standards.

Calculation Standards

At the moment, a profit formula is used for calculations, which complies with international accounting and reporting standards, as well as American standards. They are completely compatible with each other, they use the same principles of accounting and reporting, and on certain issues the American standards define the methodology more clearly.

The requirements of international standards are aimed at bringing the legislation of the current system of financial reporting and accounting standards into some kind of harmonious state. It is generally accepted that it is useful for characterizing the results of entrepreneurial activities of enterprises in a more realistic form. However, the American methodology is based on a larger number of developments, so in American companies there is a tendency to regulate operations quite clearly with less flexibility for each organization individually.

At the moment, economic profit is not reflected in the balance sheet at all, and its calculations are scientific or confidential. The development of its widespread use is hampered by the standardization of financial reporting and a certain conservatism in accounting.

Elements of economic profit

When using the residual income indicator, which was proposed by Marshall, companies had problems with comparing the initial data: the cost of capital will take into account the profitability received by the enterprise on the basis of market value, while net income serves as an accounting term, calculated on the basis of book value. Naturally, the development of the world economy and market relations has caused aggravation of disagreements between the market and accounting value of an enterprise, which is why the use of the residual income indicator has become simply impossible.

Types of profit

There are differences between accounting, economic and normal profit. Typically, economic profit is the difference between total revenue and costs: external and internal. At the same time, normal profit is also included in the internal costs, which represents the minimum payment for retaining entrepreneurial talent. Profit, which is calculated on the basis of accounting information, is the difference between income from different types of activities and external costs. Real profit is the income that remains in the entrepreneur’s accounts.

At the moment, accounting involves the use of five types of profit: gross profit, profit from sales, profit before tax, profit from ordinary net profit. Gross is the difference between revenue from the sale of goods, work, products, services and the cost of goods, work, services, and products sold. Revenue received from the sale of goods, works, services and products is usually called income from ordinary activities. The profit formula in this case is as follows:

P (shaft) = BP - C, where BP is revenue received from sales; C - cost of sales.

Features of each type of profit

Profit before tax is taken into account other expenses and income, which can be operating and non-operating. Operating income includes income that is associated with the provision of assets of the organization for a fee for temporary use. Non-operating income includes fines, penalties, penalties for violation of contractual terms, assets received free of charge, and profits from previous years identified in the reporting period.

Profit from ordinary activities is obtained by subtracting mandatory payments and the amount of taxes from profit before tax.

Net income is profit from ordinary activities plus extraordinary income and expenses. Extraordinary income refers to receipts that arise as a result of extraordinary circumstances of economic activity. Extraordinary expenses refer to expenses associated with similar situations.

“Dancing” from costs

If accounting, economic and normal profit are considered, then it is worth noting that in general, profit is defined as the difference between total revenue and total costs. This is the simplest and most common calculation option that can generally be used.

Now we need to look at costs. Accounting and economic profit require different approaches to their definition. The costs themselves can be external and internal. The first includes payments to external suppliers. When subtracted from total revenue, accounting profit can be obtained. But it will not take into account internal costs, which are usually included:

• costs associated with resources owned by the enterprise itself;
• normal profit, which depends on the most important resource - entrepreneurial ability.

Economic profit is obtained after internal costs are removed from accounting.

The most obvious differences

It turns out that accounting profit is intended only to take into account external costs, and economic profit is determined by subtracting internal costs as well. In total, external and internal costs form economic costs; they are also called alternative costs. This means that in order to determine the volume of real profit, it is necessary to proceed from the price of the resource that would be received by the owner if it was used at its best. In this case, the formation of the enterprise’s profit occurs regardless of the method of its calculation. But it is important to understand that the optimal option would be to increase economic profit.