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How to calculate gross profit (calculation formula)?


Gross profit - the difference between revenue and cost of sales of products or services. Keep in mind that gross profit differs from operating profit (profit before taxes, penalties and fines, interest on loans).

Gross profit for the manufacturer:

  • Gross profit = Revenue - Cost of sales of products or services, including depreciation.

  • Gross profit = Revenue - Cost of goods sold

Based on gross profit data, you can calculate net profit:

  • Net profit = Gross profit - operating expenses (staff salary, rental of premises, transportation costs, etc.) - the amount of taxes, penalties and fines, interest on loans.

The cost of sales for production and trade is calculated differently. In general, this indicator reflects the profit on the transaction, excluding indirect costs.

For the manufacturer, direct costs are the cost of raw materials, consumables and electricity to create the product. For example, the cost of electricity for the operation of the machine is often considered as direct costs, and the cost of lighting the machine room as overhead. Wages can also be direct costs if employees are paid the price per unit of goods produced. For this reason, service industries that sell their services on an hourly basis often attribute wages to direct costs.

Gross profit is an important measure of profitability, but net income calculation is necessary to account for indirect costs.

Net sales revenue is calculated as follows:

  • Net sales revenue = Total sales revenue - Cost of returned goods and discounts provided.

What does the concept of "gross profit" mean?

Gross profit is one of the intermediate types of profit shown in the statement of financial results (paragraph 23 of PBU 4/99, approved by order of the Ministry of Finance of the Russian Federation of 06.07.1999 No. 43n). Accordingly, it is determined according to accounting data and represents revenue from the main type (types) of activity, reduced by the cost of sales.

The price of goods (works, services) sold is inextricably linked with investments in their cost. Cost is the sum of a set of costs of different types (material, human and other resources). Gross profit reflects the fact of sales profitability (both all and by type of activity) and allows you to determine how rationally each of the company's resources is used.

How to calculate gross profit?

How, in practice, determine gross profit? The formula for calculating gross profit is as follows:

ETCshaft - gross profit,

ATyr - sales revenue,

C - the cost of goods sold (works, services).

For a trading company, gross profit can be calculated in another way - by the average percentage. In this case, the gross profit formula will have the following form:

ETCshaft - gross profit,

ATdoh - gross income,

C - the cost of goods sold.

There is also a formula for determining gross profit for goods turnover - in this case, gross profit is considered in this way:

ETCshaft - gross profit,

C is the cost of goods sold,

Rover - estimated premium in the calculation of gross profit, which is found by the formula:

Tover - trade allowance in calculating gross profit in%.

Read about the features of the organization of accounting in trade in the material "Rules of accounting in trade."

What articles are used in the gross margin formula?

Depending on what types of activities the company includes in the list of core for itself (this is fixed in the accounting policy), the items of income and expenses included in its revenue and cost, and therefore in the formula for calculating gross profit, will differ, for example:

  1. The revenue of a manufacturing company is determined by the implementation of:
  • manufactured products
  • rendered works, services.
  1. Sales revenue for a trading company is sales revenue:
  • purchased goods
  • paid trading services (for example, delivery of goods),
  1. The proceeds of the organization leasing the property will consist of rent.

However, if the accounting policy includes sales of the property of the company (for example, fixed assets, intangible assets, securities), they will also be included in the calculation of gross profit.

Cost is the sum of the items of expenses that correspond to the receipt of revenue from activities recognized as the main ones. For example, they will include:

  1. For a manufacturing company:
  • the cost of raw materials, tools, fuel,
  • salary with contributions to the PFR, FSS, MHIF,
  • production management costs,
  • depreciation deductions.
  1. For a trading company:
  • cost of purchased goods,
  • the cost of delivery of the goods upon purchase,
  • salary with contributions to the PFR, FSS, MHIF,
  • expenses for storage of goods and their preparation for sale.
  1. For an organization leasing property:
  • expenses for preparing property for rent,
  • security
  • execution of documents related to the relevant property.

If those types of activities that are usually included in other sales are also included in the main types of activity, then the costs associated with these types of activities (for example, the residual value of fixed assets, intangible assets, and the accounting value of securities) will also be included in the cost price for calculating gross profit.

About the document containing the basic rules for the formation of accounting policies for accounting purposes, read the article "PBU 1/2008" Accounting policies of the organization "(nuances)."

Gross profit - a concept contained in RAS 4/99 and arising in conjunction with the statement of financial performance. Calculate it as the difference between revenue from sales by main activities and the cost of these sales. At the same time, cost of sales does not include selling, management and other expenses. The main types of activities are determined by accounting policies.

Unfolded Formula

PE = FP + VP + OP - Nwhere

  • PE - net profit,
  • FP - financial profit. It is calculated by subtracting similar expenses from income from financial activities,
  • VP - gross profit. It is calculated as sales revenue minus the cost of production,
  • OP - operating profit. Expenses are deducted from income from other activities.
  • N - the amount of taxes.

Calculation example. For example, Firma LLC in 2015 sold products worth 600 thousand rubles, the cost of which is 400 thousand rubles. One of the premises was also leased; revenue amounted to 100 thousand rubles. Income from financial investments in other enterprises - 70 thousand rubles. The remaining costs are 100 thousand rubles.

  • We calculate the gross profit: 600 - 400 = 200.
  • Financial profit: 70 thousand rubles.
  • Operating profit: 100 - 100 = 0 rubles.
  • Tax: (200 + 70) * 20% = 54 thousand rubles.
  • Net profit will be: 70 + 200 - 54 = 216 thousand rubles.

Simplified formula

PE = V + PD - SP - UR - PR - Nwhere

  • In - revenue
  • PD - other income
  • SP - the cost of production,
  • UR - management expenses, advertising costs,
  • PR - expenses for other activities,
  • N - the amount of taxes paid.

Data for the calculation by this method can be taken from the report on the financial results of the company for the required period.

Calculation example. Suppose, in the reports of the Ships store, the following amounts are indicated:

IndicatorLine2015 (thousand rubles)
Cost price212060
Selling costs221015
Management costs222020
Other income23402
Other expense23501.5
Income tax241011.1
  • Net profit will be: 150 + 2 - 60 - 15 - 20 - 1.5 - 11.1 = 44.4 thousand rubles.

Minimized formula

PE = P - Nwhere

  • P - profit
  • N - the amount of taxes.

In this version of the calculation under the profit refers to the difference between the total income of the organization and costs for the reporting period.

Calculation example. Let the income of LLC “Organization” in the reporting year amounted to 500 thousand rubles. The cost price is 300 thousand rubles. The machine was sold for 20 thousand rubles. The remaining costs are 100 thousand rubles.

  • First you need to calculate all the income: 500 + 20 = 520 thousand rubles.
  • Next, we determine the costs: 300 + 100 = 400 thousand rubles.
  • Determine the final profit: 520 - 400 = 120 thousand rubles.
  • We calculate profit tax: 120 * 20% = 24 thousand rubles. to the budget.
  • Net profit: PE = P - N = 120 - 24 = 96 thousand rubles.

Balance calculation formula

Page 2400 = p. 2300 - p. 2410where

  • p. 2400 - net profit,
  • p. 2300 - profit before tax,
  • p. 2410 - the amount of income tax.

The data for this calculation method must be taken from the statement of financial performance.

Calculation example. Suppose the accounting statements of LLC Enterprise contain such data:

IndicatorLine2015 year (thousand rubles)
Cost price212060
Selling costs221015
Management costs222020
Other income23402
Other expense23501.5
Retained earnings230055.5
Income tax241011.1

Net profit will be:

  • (150 - (60 + 15 + 20) + 2 - 1.5) - 11.1 = 44.4 thousand rubles.
  • 55.5 - 11.1 = 44.4 thousand rubles.

For more information on how to calculate this indicator, see the following video:

Information on profitability is provided here.

What is the indicator used for?

The value of net profit most reliably characterizes the efficiency of the enterprise. An increase in this amount compared to the previous period indicates the quality work of the company, a decrease indicates the wrong policy of management personnel.

The indicator is used by many internal and external users of information about the organization:

  • Owner and shareholders. Using these data, the owner of the company evaluates the result of the enterprise, the effectiveness of the selected management system. Also, this amount is used to calculate dividends, attract private individuals as investors in the authorized capital.
  • Director. He evaluates the financial stability of the company, the correctness of management decisions, and also develops new development strategies. The indicator directly affects profitability, which is why the analysis of the balance of available funds is important for top managers.
  • Suppliers. It is especially important for them that the organization is able to pay for raw materials, and the indicator is used to assess the stability of the company. If she has little money, then some suppliers may refuse to conclude a contract, as they will not be sure of payment for services and materials.
  • Investors. Based on the indicator, they are considering the possibility of financial investments. The higher the amount of free income, the more attractive the company is for investors. First of all, they plan to receive additional income from shares.
  • Lenders. Borrowers determine the solvency of the company. Money has the greatest liquidity, that is, the ability to be quickly sold. The more that an organization has at their disposal, the faster it can pay off its debts. Accordingly, there is a greater chance of obtaining a loan from the bank.