Profit of the enterprise: formation and distribution of profit, accounting and analysis of use

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Every organization in a market economy works to make a profit. This is the main goal and indicator of the effectiveness of the use of available resources by the company. There are certain features of the formation of profit, as well as its distribution. The further functioning of the company depends on the correctness and validity of this process. How the formation of the profit of the enterprise and the distribution of profits will be discussed further.

General definition

Considering the economic content, the formation and distribution of profits of enterprises, one should delve into the essence of such a concept as a financial result. Its determination is carried out according to the established methodology. The result of the organization's activities is income and profit from the main, investment and financialactivities. On its basis, the efficiency of the enterprise in the period under review is assessed. The indicator is considered in dynamics, which allows you to determine the changes and factors that influenced it.

The starting point for calculations is the amount of proceeds from the sale of products. You also need to take into account income from transactions outside the sale of core products.

Profit is the resulting indicator. It is defined as the difference between income and resources expended. If the result of such an action is positive, this indicates effective management, organization of the production process at the proper level. With a negative calculation result, we can say that the company was unprofitable in the reporting period. In this case, you need to look for ways to eliminate negative impacts on the activities of the organization.

In the course of studying the economic content, the formation and distribution of profits of enterprises, it should be noted that the calculation takes into account the total amount of funds for sales at a market price. But this does not include excise and VAT. The cost is subtracted from the amount received. This is the cost incurred during the production of products.

There are three main types of profit:

• from implementation;
• non-operating;
• from the sale of other valuables.

There are many factors that affect profits. This may be the volume of sales, the structure and cost of production, the market price of products. Indirectlythis indicator is influenced by the quality of finished goods, the situation in the industry, inflation, etc.

Profit Analysis

There are certain principles for the formation and distribution of enterprise profits. In the process of management, the correctness of the organization of the production process, the financial sphere of the company is monitored. The structure of the financial result is assessed, the factors that influenced it are determined. Analysts determine the amount of profit from the sale of finished products and blanks, from investment and financial activities.

This indicator is used in the calculation of a number of coefficients:

• profitability;
• change in net profit;
• operating cost study;
• efficiency in asset management;
• debt servicing;
• liquidity;
• performance;
• material consumption;
• market figures;
• other.

Analysis of the processes of formation and distribution of profits of an industrial enterprise is of interest not only to managers and owners of the company, but also to investors and creditors. Therefore, such an important indicator and the structure of its formation is determined with a certain frequency.

Profit is the value of the surplus good. At the time of realization of a given value, income is obtained. This indicator is an indicator of the success of the organization in its industry. Profit can be received by the enterprise at different levels. ATdepending on this, it can be gross, before tax, from sales or net.

Profit functions

There are different types of business profits. Formation, distribution and use of them occurs according to a certain methodology. Financial results are involved in the management of the company. In the process of planning and strategizing, there is a search for reserves and ways to increase profits. The company strives to work in the reporting period not only without loss, but also to get the maximum income.

Considering the principles of forming and distributing the profit of an enterprise, you need to understand its functions:

1. Estimated. Profit can be presented in absolute or relative terms. Their analysis makes it possible to determine whether the main, investment, financial activities of the company are effective, whether management decisions are expedient in the current period, what are the company's prospects. In this case, it is possible to consider the influence of all factors on the final result of the enterprise. It is estimated how material, labor, monetary or other resources were spent.
2. Stimulating. The amount of profit is an indicative value that demonstrates the interest of all employees in obtaining the required financial result. The level of income reflects the satisfaction of workers with the activities in which they are engaged. According to the profit indicator, it is possible to determine whether the level of remuneration in production is sufficient, whether the motivation system is built correctly. It is the mechanism of distribution of the financial result that makes it possible to stimulate one or another area of development. Perhaps, in the current circumstances, it is necessary to raise the wages of workers or to develop innovative technologies. In some cases, it is more expedient to upgrade fixed assets or pay high dividends to shareholders, thereby increasing the value of the company in the market. Profit is a stimulating factor for development in the chosen direction.

Analysis of the process of formation, distribution, use of enterprise profits is extremely important. The fact is that the market value of the company directly depends on this indicator. This affects the well-being of the organization, obtaining competitive advantages within its industry. When factors that negatively affect the size of profit are identified, methods for their elimination are developed. Therefore, financial results are constantly analyzed. This work is carried out with a certain frequency.

How profit is calculated

The mechanism for the formation and distribution of enterprise profits is stipulated by law. This is necessary to standardize the display of the company's financial results. Their activities become more transparent, easier to understand and evaluate by third-party users of information. Income is the sum of all funds received by the company during the reporting period in the course of its activities. It has a certain structure.

The best way to understand the principle of calculating net income is tofinancial statements. The company generates a report on financial results, which is also called Form No. 2. The formation and distribution of the company's profit begins with the preparation of this document.

According to this technique, several intermediate values of income are first determined. First, the total amount of revenue from product sales is calculated. To do this, take into account the posting data reflected in the accounts at the end of the reporting period. The cost of production is subtracted from the result obtained. For calculation, they take the proceeds, from which the amount of excises and VAT has already been taken away. The result is called gross profit or loss.

Commercial expenses, as well as management costs, are subtracted from the result. The result is called profit (loss) from sales.

During the calculations, there are a few more steps to be taken. Income from participation in other companies is added to the profit from sales. It can also be interest receivable, other income. Further, the interest paid by the enterprise and other expenses are deducted. The result is called profit before tax. The amount of the corresponding payments is deducted from it.

After carrying out the above manipulations, the net profit of the enterprise is obtained. This is the end result of the company's activities in the reporting period. After its formation and calculation, the distribution procedure takes place. But this is only possible if the company has made a profit, not a loss.

Sources of information for generating the report

Considering the principles of forming and distributing the profit of an enterprise, it is briefly worth mentioning the sources of information for determining the financial result. In the course of accounting, a number of standardized procedures are carried out.

All data used in the preparation of the report are reflected in the accounts. They are summarized to calculate the sum of income and profit. Information is taken from the following accounts:

• "Sales" (score 90). It reflects information on the amount of income and expenses that have been reduced to a single indicator. This allows you to determine the amount received at the end of the reporting period in the implementation area. It reflects information about the cost of production, purchased equipment, materials and goods. It also reflects communication services, transportation, participation in the authorized capital of other enterprises.
• “Other expenses and income” (account 91). It reflects information on other income and expenses that occurred in the reporting period.
• “Shortages, costs arising from damage to goods and materials” (account 94). These are financial losses that are determined in the course of damage to material assets. Such costs can arise both in the process of manufacturing products, and during storage, sale, and transportation of products. If the damage was caused as a result of a natural disaster, it is reflected in the 99th account. When calculating the cost, this amount is not taken into account.
• “Future reserves” (account 96). This is the amount of funds that were reserved in the reportingperiod, but will fully transfer their value to the result only in the future. These are reserves that may relate to the production or sale of products, for example, the cost of repairing or maintaining equipment, paying bonuses, accruing vacation pay and other similar expenses.
• “Deferred costs” (account 97). These costs occurred in the reporting period, but will be fully reflected only in the future. This, for example, can be the cost of preparatory work during the main production, equipment repair, environmental protection, etc.
• "Deferred profit" (account 98). This is the sum of all profits that are received in the reporting period, but will finally transfer their value into the future.

Report Generation

Based on the results of the company's activities for the year (six months or a quarter), the formation and distribution of the company's profit takes place. Items of income and expenses of Form 2 reflect all the necessary information that is used in the course of the analysis. Filling in the report on financial results is carried out according to the established methodology.

Line 2110 contains the final result of the main activity of the enterprise. This is the amount of income from the sale of finished products.

Management costs are reflected in line 2220. This is the remuneration of management staff. This article includes the amount of relevant taxes, as well as other charges.

Other income and expenses

Line 2310 indicates income from participation in the activities of otherorganizations. This is the sum of interest, dividends and other similar payments. If the company received income from other investment activities in the reporting period, they are displayed in line 2320 of form No. 2.

Other types of profits that are not included in the above columns of the report are indicated in line 2340. These may be pen alties paid in favor of the enterprise, pen alties and other similar income. It can also be profit from the sale of property, exchange rate differences and other income.

Considering the model of formation and distribution of profits of an enterprise, it is worth noting some features of cost accounting. Thus, the cost of paying interest is reflected in article 2330. Other expenses must be reflected in article 2350.

General principle of profit sharing

Studying the process of forming and distributing the profit of an enterprise, it is worth noting several features. The procedure for displaying the financial result is regulated at the legislative level. But the process of distribution of profits is stipulated in the charter of the company. This procedure is also regulated by the relevant provisions developed by economic services.

Profits are distributable only after payment of all necessary taxes. Some financial sanctions may also be deducted from this amount. The funds received are used to develop the organization, stimulate investment attractiveness and other areas of industrial and social development.

The state does not directly intervene indistribution processes. But through the provision of tax incentives, it reserves the right to finance some of the necessary areas of development from the net profit of the enterprise. The formation and distribution of profits is subject to the norms of legislation in the field of formation of reserve capital.

Dividends

The owners of the enterprise are interested in receiving their share from participation in the capital in case of formation of the net profit of the enterprise in the reporting period. The formation and distribution of profits has certain nuances for enterprises of different forms of ownership. So, according to the results of the company's activities, the owners can receive a certain financial reward. These can be dividends on shares, deductions in accordance with equity participation in the authorized capital of the organization.

The decision to pay dividends is made at the general meeting. If the owners own ordinary shares, even if they receive net retained earnings, they may not receive a payment. The decision is made by voting at the meeting of shareholders. In some cases, it is more expedient to direct all profits to the development of production in order to receive dividends in the future several times higher than at the moment.

The amount allocated for consumption is distributed according to equity participation. The amount of dividends a company pays determines its market value. Therefore, this procedure is treated very responsibly.

Funding Activities

The development of production is financed by the net profit of the enterprise. Formation andthe distribution of profits is the most important factor in stimulating this process. Dividends are paid out of the amount received, and then the corresponding funds are filled from the remaining funds.

First of all, a reserve is created. This is the amount that increases the financial stability of the company. But its size cannot be too large, since the capital must work and make a profit. The rest of the funds are used to modernize equipment, train personnel, purchase new production lines and technologies, conduct innovative developments, etc.