The income of an enterprise is what a particular legal entity generally engages in its activities for. Thanks to this indicator, it becomes possible to expand, pay wages, purchase new equipment, purchase materials, pay for the services of third-party organizations, and so on.
Definition
The income of an enterprise is the money that a legal entity receives for providing its own services, selling goods, carrying out work, and so on.
Traditionally, income is calculated after all expenses that the company incurred in the process of performing its functions have been deducted from the funds received. Income is calculated for a specific reporting period and can be used for any suitable purpose.
Types of enterprise income
There is a certain division of funds received for performing services. There are such options as money received in connection with emergency situations, obtaining additional profit through the taxation system, enterprise income from various activities, and directly receiving funds from performing basic functions.
Sales income
The profit that was received by the company for the sale of goods, the implementation of work or the provision of services is the income of the enterprise. In accordance with current regulations, 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 removed by him from the warehouse himself). It should be noted that from the money that was transferred for the products, it is necessary to subtract any possible expenses such as fees and so on.
The situation is similar with works and services. They must be completed in a timely and complete manner, and funds for them must be received in the company’s account. An example of such a situation could be the simple sale of any goods. The seller and buyer enter into an agreement. Under this agreement, the seller produces (or resells) any products. The buyer picks it up (or receives it through transportation from the seller) and makes payment to the company’s account at a predetermined point in time. This can happen both before the actual receipt of the cargo 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 transfer of funds even before production begins. Much depends on the relationship and trust between the two parties to the transaction, their reputation, the peculiarities of the work process, established practice, and so on.
Gross income
If the main income of an enterprise involves receiving money for performing basic functions, then its gross type 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 may serve as an example. A company purchases the materials required to produce a product. She spends money on it. Now you additionally need to purchase equipment, pay salaries to employees, and so on. This is also all considered expenses. Then, as a result, products are produced that are sold to the buyer. This is already income. The difference between the amounts that were spent on creating the product and those that were ultimately received is
Income from core and non-core activities
The financial income of an enterprise from its core activities is the next stage of calculations, which takes into account the previously calculated, with the exception of all funds spent on the general activities of the company for a certain point in time. That is, if in the previous paragraph only those expenses were taken into account that were incurred by the company in the process of creating a product or providing a service, then here almost everything that is possible and that cost the company money before making a profit is already taken into account.
There is also other income for 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 for 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 rental of company property by other persons, from deposits, the sale of fixed assets, materials, ownership of shares, and so on. This can be clearly seen using this example: there is a certain company that sells its products. To receive it, she may offer, for a fee, to transport the ordered product to a specified point, unload it, install it, teach how to use it, and so on. 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, income is directly related to taxes. Thus, they distinguish those profits that exist before the payment of money 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 focus mainly on the second option. This is due to the fact that taxes will still have to be paid, and it is much easier to immediately take this factor into account, 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, a business is entitled to a refund of previously paid taxes. That is, you will still have to give the money back first, but there is a high probability that it will eventually end up in the account again. Considering 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 usefully 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 issued insurance, they can also become the reason for making a profit. For example, a situation occurs in which the insured equipment is damaged. The case fits as described in the contract with the insurance company, and it pays all due funds. At the same time, the damaged equipment was either not needed at all, or was planned for replacement. 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.
A good example: there is a company that produces 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, 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 company’s net income.
Results
From all that has been said above, it follows that the financial activities of an enterprise in terms of receiving funds for performing its functions are 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.
The income of an enterprise is the basis on which all activities rest. It is the meaning of the functioning of a legal entity (at least most of them). Of course, there are also companies that do not make generating income their main responsibility. However, they also have income from charitable funds, from performing any non-core work, and so on.