Difference Between Revenue and Profit

Every investor invests his money in the business to earn more profit from it. The profit is to work as an incentive to the investors in taking the risk and blocking their resources. The Profit can be maximized by maximizing the total revenue of the business.

But normally these terms are used interchangeably, which is wrong. So, to know the Difference Between Revenue and Profit, First of all, we have to clear the meaning of both terms. These are explained below: 

Meaning of Revenue: –

The total amount received or receivable from the operational or non-operational activities is known as Revenue. The total amount is that amount from which no deduction has been made for expenses, In other words, the total income earned by the business within the financial year.

Revenue Can be divided into Subcategories i.e. Revenue from Operational Activities and Revenue from Non- Operational Activities.

Normally, Revenue is used for Operational Revenue Because Non-Operational Revenue is non-recurring in nature and cannot be estimated.

Examples: –

Revenue Include: –

1. Total amount earned from the sale of finished stock 
2. Amount earned from the sale of asset and
3. Compensation from Court, Commission, rent and subsidies received or earned. 

Formula of Calculation of Revenue: –

“Revenue =  Total Sales + Other Incomes – Sales Return”

“Operational Revenue =  Total Sales  – Sales Return”

“Non-Operational Revenue =  Other Incomes”

Meaning of Profit: –

That amount that did leave after the deduction of the total amount of expenses and losses from the total income or revenue is known as profit. The profit can be calculated majorly in three subcategories, these are shown as following: 

1. Gross Profit
2. Operating Profit 
3. Net Profit

The formula of Calculation of Profit: –

“Profit =  Revenue – Expenses & losses”

Chart of Difference between Revenue and Profit: –

Download the chart:

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The conclusion of the Difference: –

The Revenue includes all the share of profit, so profit depends on the Revenue of the business in a particular financial year. Every new startup has to focus on their revenue first, if they get a handsome share of the market of their product then they will go to earn profits. 

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