The income of an enterprise is that for which a legal entity is generally engaged in its activities. Thanks to this indicator, there is an opportunity to expand, pay wages, purchase new equipment, purchase materials, pay for services of third-party organizations and so on.
Definition
An enterprise’s income 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 incurs in the process of fulfilling 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 enterprise income
There is a certain division of funds received for the performance of services. They distinguish such options as net income, money received in connection with emergencies, obtaining additional profit with the help of a taxation system, enterprise income from various business options and directly receiving direct funds from performing basic functions.
Sales income
Profit, which was received by the company for the sale of goods, work or services, is the income of the company. 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 independently from the warehouse). It should be noted that in this case, from the money that was transferred for the product, it is necessary to deduct any possible expenses such as excise tax, taxes and so on.
The situation with work and services is similar. They must be completed in a timely and complete manner, and funds for them must be received at the expense of the enterprise. An example of such a situation may be the simple sale of any goods. The seller and the buyer conclude a contract. Within the framework of this agreement, the distributor produces (or resells) any products. The buyer picks it up (or receives it through transportation from the seller) and, at a predetermined time, makes payment to the company account. This can occur 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 the goods are sold to end customers or transferring funds even before the start of production. Here, much depends on the relationship and trust between the two parties to the transaction, their reputation, features of the work process, established practice, and so on.
Gross income
If the main income of the enterprise implies receiving money for performing the basic functions, then its gross type is the difference between the money received and those 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 how much money was spent on creating the product and how much was received for it.
The following situation may 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. Here is the difference between the amounts that were spent on creating the product and those that were received in the end, and this is gross income.
Income from core and non-core activities
The financial income of the enterprise from its main activities is the next stage of calculations, which take into account the previously calculated gross profit with the exception of all funds spent on the general activity of the company for a certain point in time. That is, if in the previous paragraph we took into account only those expenses that were incurred by the company in the process of creating the goods or the implementation of the service, then practically everything that is possible and what the company cost money until the moment of making a profit is 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 which also allow you 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 can be considered making profit from renting property of the company by other persons, from deposits, selling fixed assets, materials, owning shares and so on. You can clearly see on this example: there is a certain company that sells its products. To obtain additional income, she may offer, for a fee, to transport the ordered goods to an indicated point, unload it, install it, teach how to use it, and so on. Here is the sale of products itself - the main income, and everything else - transportation, installation, etc. - is no longer the main activity.
Taxation and Income
In addition, the income and expenses of an enterprise are directly related to taxes. So, allocate those profits that exist until the moment of payment of money to the state budget and their balance after the implementation of this operation. The first option shows a more honest income, which was obtained as a result of the company, but focuses 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, an entity is entitled to a refund of funds previously paid as taxes. That is, at first you still have to give the money back, but there is a high probability that they will eventually get into 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’s still worth taking into account a certain amount that can be spent in the future with benefit.
Emergencies
Despite the fact that in most cases, various non-standard moments that may affect the company’s work most often lead to losses (in one way or another), with a certain amount of luck and the right insurance, they can also cause profit. For example, a situation occurs 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 required 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 a company could receive for the sale of unnecessary fixed assets.
Net income
The net cash income of enterprises is the difference between those expenses that the company incurred due to force majeure situations, as well as those profits that remained after everything was realized and the tax was already paid. It is with this money that the company can count on and use it to reward employees, modernize, expand, and so on. They can also be divided between 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 derived from the core business of the company.
A good example: there is a company that produces goods. 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 as the company's net income.
Summary
From the foregoing, it follows that the financial activities of an enterprise in terms of obtaining funds for the performance of 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 the enterprise is that basis on which all activity rests. 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 the main responsibility. However, they also benefit from charitable foundations, from performing any non-core work, and so on.