What is the Difference Between Profit and Gain?
🆚 Go to Comparative Table 🆚The difference between profit and gain is essential to understand in financial accounting. Here are the key distinctions between the two terms:
- Profit: Profit is the excess of revenues over expenses during a specific accounting period. It is generated within the usual business operations and is typically categorized into gross profit or net profit. Profit increases the owner's capital as it is added to the capital at the end of each accounting period.
- Gain: A gain refers to any economic benefit or cash inflow obtained from the sale of a long-term asset or from events that are incidental to the business, such as winning a court case or appreciation in the value of an asset. Gains arise from transactions that are outside the firm's normal operations and are considered non-recurring in nature.
In summary, profit is the total earnings for a period, generated within the usual business operations, while gain is an economic benefit derived from non-recurring transactions or events incidental to the business.
Comparative Table: Profit vs Gain
The difference between profit and gain can be summarized as follows:
| Feature | Profit | Gain |
|---|---|---|
| Definition | Profit is the total earnings for a period, calculated as total revenue minus total expenses. | Gain is the proceeds received from the sale of fixed or financial assets, generated outside of business operations. |
| Generation | Profit is generated within the usual business operations. | Gain is generated outside of business operations. |
| Types | There are three main types of profit: gross profit, operating profit, and net profit. | There are two types of gains: realized and unrealized. |
| Calculation | Gross profit = Total revenue - Costs of goods sold. Net profit = Total revenue - Total expenses. | Gain = Selling price - Acquisition value (purchase cost). |
In summary, profit is the financial gain made from the company's core business operations, while gain is the financial benefit derived from outside the usual business operations, such as the sale of assets or investments.
Read more:
- Profit vs Revenue
- Profit vs Profitability
- Cash vs Profit
- Margin vs Profit
- Net Profit vs Gross Profit
- Net Income vs Net Profit
- Surplus vs Profit
- Balance Sheet vs Profit vs Loss
- Capital Gains vs Income
- Dividend vs Capital Gain
- Gross Profit vs Operating Profit
- Turnover vs Profit
- Operating Profit vs Net Profit
- Accounting Profit vs Economic Profit
- Gross Profit vs Gross Margin
- Wealth Maximization vs Profit Maximization
- Earnings vs Revenue
- Lose vs Loss
- Realized vs Unrealized Gains