Profit is the most important category in the field of market relations. In this regard, it performs a number of basic functions.
Thus, profit is an indicator that most fully reflects production efficiency and evaluates the economic activity of the enterprise. This feature is evaluative.
Profit also has a stimulating effect, aimed at increasing the effectiveness of the financial and economic activities of the organization. This function is stimulating.
In addition, profit acts as a source for the formation of extrabudgetary funds and budgetary resources. This function is called fiscal.
In the budgets, the receipt of profit is carried out in the form of taxes. Together with other revenue, it is used to finance various needs, state production, investment, social, scientific and technical programs, as well as to ensure the fulfillment of state functions.
In the process of evaluating and planning the financial and economic activities of the organization, as well as in the redistribution of income that remains at its disposal, certain indicators are used. Important informative indicators of company performance include net and taxable income. The first concept implies the income remaining at the disposal of the organization.
But taxable profit is the main object when collecting income tax. Of great importance is the organization of management of the formation of this part of the income. This takes into account changes in gross costs of circulation and production, in gross income of the organization.
Taxable profit is also taken into account , the formula of which contains the indicator of adjusted income reduced by the amount of gross costs and the amount of depreciation.
Legislation provides for specific taxation opportunities for enterprises. In particular, organizations independently determine taxable profit, the amount payable to the budget.
In accordance with the law, there are several types of deductions for income. So, they allocate tax on dividends, payment of winnings, repatriation of income, other taxes withheld in the process of payment of income. Such a classification avoids various problems. In particular, double taxation of profits. Having made the necessary deductions, the organization receives at its disposal net income.
Net and taxable profit have significant differences. So, in the use of net income do not have the right to intervene any authorities, including the state. In this case, taxable profit provides for fixed deductions.
In accordance with market conditions for conducting business activities, priority areas for the use of net (own) income are formed. So, in connection with the development of competition, there is a need to expand production, improve it, as well as meet the social and material needs of work collectives.
The income remaining at the enterprise is divided into two parts. The first part is aimed at increasing the property of the company, participating in the funded process. It should be noted at the same time that it is completely optional to use all the income aimed at accumulation. The remaining share of unused profit in this case has a large reserve value. Subsequently, this reserve may be used to cover probable losses or to finance costs. This income is called retained.
The second part of the profit goes to consumption. The areas of accumulation and distribution of own income are determined by the company independently.