distinguish between profit and gain
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The key difference between profit and gain is that profit is the total earnings for a period whereas gain is an economic benefit derived by disposing an asset above its net book value or market value....
What is a Profit
In simple accounting terms, profit can be summarized as the summation of total income less total expenses. Thus, it is the actual earnings of the company. This is an indication of the financial robustness of the business. The company incurs a loss in case total expenses exceed total revenues.
There are 3 main types of profit reported in the income statement. They are,
Gross Profit
Gross profit is the revenue less cost of goods sold. This shows the amount of revenue left after covering the cost of goods sold and is calculated by Gross Profit margin (GP margin). Higher the GP margin, higher the efficiency in conducting the main business activity.
Gross Profit Margin = Gross Profit / Revenue *100
Operating Profit
When the net of operating income and operating expenses are deducted from gross profit, the resulting profit figure is the operating profit. Higher the operating profit; greater the efficiency of the core business activity. The same is measured by the Operating Profit Margin ratio (OP Margin)
Operating Profit Margin = Operating Profit/ Revenue *100
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the key difference between profit and gain is, profit is the total earning of a period; gain is an economic benefit by discussing arm assest about its net book value or network value
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