Enterprise income - what is it? Types of enterprise income

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

The income of an enterprise is what this or that legal entity is generally engaged in its activities for. Thanks to this indicator, it becomes possible to expand, pay wages, purchase new equipment, purchase materials, pay for third-party services, and so on.

Definition

The income of an enterprise is the money that a legal entity receives for providing its own services, selling goods, performing work, and so on.

Traditionally, income is calculated after all expenses incurred by the company in the course of performing its functions are deducted from the funds received. Income is calculated for a specific reporting period, and can be used for any suitable purpose.

Types of company income

There is a certain division of funds received for the performance of services. There are such options as net income, money received in connection with emergencies, obtaining additional profit using the taxation system, enterprise income from various activities and direct receipt of funds from the implementationbasic functions.

Revenue from sales

The profit that was received by the company for the sale of goods, the implementation of work or the performance of services is the income of the enterprise. In accordance with applicable norms, standards and laws, the concept of such factors includes any basic functions that have been fully implemented. That is, if these are goods, then they must be fully paid for and sent to the buyer (or taken out by him independently from the warehouse). It should be noted that in this case, from the money that was transferred for the products, it is necessary to deduct any possible expenses such as excise fees, taxes, and so on.

The situation with works and services is similar. They must be completed in a timely and complete manner, and the funds for them must be received at the expense of the enterprise. An example of such a situation can be a simple sale of any goods. The seller and the buyer enter into an agreement. Under this agreement, the seller produces (or resells) any products. The buyer picks it up (or receives it by transportation from the seller) and at a predetermined point in time makes payment to the company's account. This can happen both before the direct receipt of the goods, and after this moment. Among other things, many other possibilities can be taken into account, such as payment as goods are sold to end customers or the transfer of funds even before the start of production. Much depends on the relationship and trust between the two parties.deals, their reputation, workflow features, established practices, and so on.

Gross Revenue

If the main income of an enterprise involves receiving money for performing basic functions, then its gross variety is the difference between the money received and the funds that were spent on the purchase of materials, maintenance or purchase of equipment, and so on. In fact, this is the profit that the company receives in its pure form, that is, when it is clear exactly how much money was spent on creating the product and how much was received for it.

The following situation can serve as an example. The company purchases the materials required for the production of goods. She spends money on it. Now it is additionally required to purchase equipment, pay salaries to employees, and so on. This is also considered an expense. Then, as a result, products are produced that are sold to the buyer. This is already income. This is the difference between the amounts that were spent on the creation of the product and those that were received in the end, and this is the gross income.

Income from core and secondary activities

Financial income of the enterprise from the main activity is the next stage of calculations, which takes into account the previously calculated gross profit, excluding all funds spent on the general activities of the company at a certain point in time. That is, if the previous paragraph took into account only those costs that were incurred by the company in the process of creating a product orthe implementation of the service, then almost everything that is possible and that cost the company money before making a profit is already taken into account.

There is also another income of the enterprise. These are the funds that it receives from some extraneous activities that are not directly related to the main functions, but also allow it to have a certain profit. There are a lot of such options, and they directly depend on the characteristics of a particular organization. An example of this is the receipt of profit from the lease by other persons of the property of the company, from deposits, the sale of fixed assets, materials, shareholding, and so on. You can clearly see this example: there is a certain company that sells its products. To obtain additional income, it may offer, for a fee, to transport the ordered goods to the specified point, unload it, install it, teach it to use, and so on. Here, the sale of products itself is the main income, and everything else - transportation, installation, etc. - is no longer the main activity.

Taxation and income

Among other things, the income and expenses of the enterprise are directly related to taxes. So, they distinguish those profits that exist until the moment the money is paid to the state budget and their balance after the implementation of this operation. The first option shows a more honest income that was received as a result of the company's activities, but they are mainly guided by the second option. This is due to the fact that taxes are paid anywayit will be necessary, and it is much easier to immediately take into account this factor, distributing funds that will definitely not go anywhere between different directions, than to cut off funding in the future due to incorrect calculations.

In some cases, an enterprise is en titled to a refund of funds previously paid as taxes. That is, at first you still have to give the money, but there is a high probability that they will eventually end up in the account again. Given the fact that it is not always possible to calculate exactly when such a return will occur, it is extremely difficult to predict anything on this basis. However, it is still worth taking into account a certain amount that can be spent with benefit in the future.

Emergencies

Despite the fact that in most cases, various non-standard moments that can affect the work of the company, most often lead to losses (in one amount or another), with a certain amount of luck and the presence of properly executed insurance, they can also cause making a profit. For example, there is a situation in which the insured equipment is damaged. The case fits the one described in the contract with the insurance company, and it pays all the due funds. At the same time, the damaged equipment was either not needed at all, or it was planned to be replaced. As a result, the amount of insurance payments may significantly exceed the money that the company could receive for the sale of unnecessary fixed assets.

Net income

Net cash incomeenterprises are the difference between the costs incurred by the company due to force majeure situations, as well as those profits that remained after everything was sold and the tax has already been paid. It is on this money that the company can count and use it to encourage employees, modernize, expand, and so on. They can also be divided among the owners of the company (if there are several). The entire net type of income is summed up from non-core, operating, as well as profits received from the company's core activities.

An illustrative example: there is a company that manufactures a product. Then she sells it and gets paid for it. The next step is to pay taxes and, as an option, incur certain costs associated with force majeure situations. That is, the goods are sold, the money is received, then taxes are paid. Then, for example, a flood occurs, and repairs are carried out from the funds calculated in the previous paragraph, and only what remains can be considered the net income of the company.

Results

From all of the above, it follows that the financial activity of an enterprise in terms of obtaining funds for the performance of its functions is divided into several stages, at each of which it is possible to calculate certain types of income. They can both carry useful statistical information and be taken into account in the future for subsequent calculations, determining the future capabilities of the company, and so on.

Enterprise income is the basis on whichwhich all activities are supported. It is the meaning of the functioning of a legal entity (at least, most of them). Of course, there are companies that do not make income generation their main responsibility. However, they also have income from charitable foundations, from performing any non-core work, and so on.