Profit is the difference between all expenses and income earned. It is she who characterizes the level of enterprise performance. Accounting for the formation and distribution of profits is reflected in the balance sheet. But in the forms of balance , several of its varieties are distinguished:
1.
Gross profit, it is calculated as revenue from sales - the cost of production (cost).
2. Profit from sales - calculated as gross profit - management expenses.
3. Profit before tax. It is formed by the difference of the previous indicator with other income and expenses.
4. Net profit. This is exactly the type of enterprise income that remains after paying all tax fees.
The amount of profit depends on the value of the proceeds from the sale and the cost of production. But this is an accounting definition of profit, and there is an economic one. According to it, profit depends on the size of entrepreneurial risk, and the higher it is, the greater the probability of obtaining a double profit.
Its value is affected not only by prices for raw materials and materials, but also by the state of the market. If the company sells innovative products that do not have competitors, respectively, the profit will be higher.
Profit distribution is carried out evenly to replenish funds and for production purposes. The net profit of the organization is spent on the development of production and promotion of the team. Also, the distribution and use of the organization’s profit is carried out on the following branches:
1. Purchase of new equipment or reconstruction of existing equipment.
2. The buildup of own working capital, which are lost as a result of inflation.
3. Repayment of loans or interest on them.
4. Environmental protection from pollution.
5. Bonus staff.
Thus, the distribution of profit is carried out in two directions:
- For accumulation, i.e. increase part of the property,
- For consumption. Launch on a new range of funds for further receipt.
Moreover, the accumulated part of the profit is not necessary to spend in the next reporting period. It can be left until the organization for one reason or another does not begin to incur losses. Then the funded part will go to cover losses. The gain related to accumulation is the result of the fact that the company operates successfully and financially independently.
If we consider a joint-stock company, the distribution of profits in funds covers the definition of the owner of the fund, which may also be different. The consumption fund is in the hands of the labor collective (but even if it is not, it is distributed according to the needs of employees). Therefore, these funds are not classified as equity. And accumulation funds are the property of shareholders and founders. The free part of the profit, as a rule, joins the authorized capital.
Proper distribution of profits guarantees the company financial stability in the market and the expansion of its business.