What is a winning formula

Profit - What is the profit?

The profit is the surplus that is generated in a certain period. Various calculation methods are used to determine the profit.

In order to maximize your profit, you need to reduce your costs. Find out here how you can get your costs under control with the help of liquidity planning.

The profit indicates how much a company has "earned" - in other words, what surplus it has achieved. Determining the profit is extremely important internally for corporate management and externally for corporate valuation.

Profits can be defined in different ways: Business administration, commercial law, tax law and internal accounting provide varying definitions and calculations:

Profit in business administration

The term "profit" is not clearly defined in business administration, but includes various interpretations.

Profit (nominal capital maintenance)

In the context of maintaining nominal capital, profits are achieved when equity has increased.

Profit (preservation of real capital)

After real capital preservation, however, there is a profit if the equity has risen by more than the inflation rate.

Profit (maintenance of substance)

In contrast, the maintenance of substance speaks of profit if the enterprise value determined in the context of the cash flow has risen.

Internal accounting profit

In internal accounting, the term “profit” is defined differently than in business administration. Cost accounting says that there is a profit when the proceeds exceed the costs.

Revenues are income that is directly related to the operational performance process. Revenue means the increase in value of a company in the form of goods / services produced, regardless of whether these were actually sold. Sales / income and revenue can, therefore do not have to be identical.

External income, e.g. from stock trading, is not included here.

Calculation of profit (internal accounting)

A simple formula is used to calculate the profit in the context of cost accounting:

Profit = Revenue - Cost

The income only includes operating income, i.e. sales and interest income.

Only operational costs are counted as costs, e.g. labor costs, costs for office supplies or raw materials.

The profit after cost accounting is also called Operating profit designated.

Profit in commercial law

According to Section 242, Paragraph 2 of the German Commercial Code (HGB), there is a profit if the income exceeds the expenses.

All income generated by a company is included in the income statement, i.e. - unlike in cost accounting - also non-operating income such as income from stock trading.

Calculate profit (commercial law)

A company's profit is calculated as follows in the income statement:

Profit = income - expense

The income includes all income of a company, including income from share trading or rental income from non-company property.

The expense also includes non-operational expenses such as donations, costs from theft or bad debts.

The profit on the income statement is also called Corporate profit designated.

Profit in tax law

There is another way of determining profits: The calculation according to tax law, especially in the context of the income-surplus-calculation (EÜR) according to § 4 Abs. 3 EStG.

The expenses are deducted from the income to determine the profit. An income denotes an incoming payment, while an income / income does not necessarily have to correlate with an income.

Calculation of profit (tax law)

To calculate the profit according to EÜR, the following formula is used:

Profit = Income - Expenditure

Income includes all incoming payments from income, expenses all disbursements from expenses.

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similar words

Effort and income

contribution margin

Profit and Loss Account (P&L)

Cost accounting

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