Profit (accounting)

This article is about profit in accounting and business. For profit in economics and political economy, see Profit (economics).

"PBIT" redirects here. For the measurement of computer storage, see Petabit.

Profit, in accounting, is an income distributed to the owner in a profitable market production process (business). Profit is a measure of profitability which is the owner's major interest in the income-formation process of market production. There are several profit measures in common use.

Stock index chart showing the recovery after the 2020 Stock Market Crash

Income formation in market production is always a balance between income generation and income distribution. The income generated is always distributed to the stakeholders of production as economic value within the review period. The profit is the share of income formation the owner is able to keep to themselves in the income distribution process. Profit is one of the major sources of economic well-being because it means incomes and opportunities to develop production. The words "income", "profit" and "earnings" are synonyms in this context.

Other terms

Net sales = gross sales – (customer discounts, returns, and allowances)

Gross profit = net sales – cost of goods sold

Operating profit = gross profit – total operating expenses

Net profit = operating profit – taxes – interest

Net profit = net sales – cost of goods sold – operating expense – taxes – interest

See also

• Gross income
• Net profit
• Profitability index
• Rate of return
• Return on assets
• Return on equity
• Rate of profit
• Profit model
• Income statement