Profit is the increase in wealth that occurs from a transaction or operation of an economic nature.

Seen in another way, profit is the difference between the income generated by an economic activity and the costs necessary to develop that business or occupation.

It should be noted that in order to trade a good or service, costs of production, distribution, marketing, among others, must be incurred.

Profit is often used as a synonym for economic benefit or utility, being the opposite of a loss. That is, when the results of a company, by subtracting income less expenses, are positive, a profit has been produced. However, if the result is negative, it is a loss.

From an accounting point of view, the profits of a company are recorded in the statement or income statement.

Non-monetary gains

Until now we have referred to earnings as an objective concept, which can be observed in the financial statements of a firm, or in the accounts of an individual.

However, the gains are not always monetary. It can, for example, be about saving time by changing routes, so that you can get from point A to point B faster.

Likewise, space can be gained by changing the way in which the furniture in a room was located.

Another use of the word gain is muscle gain, which is the increase in volume in a muscle. In addition, let us not forget that there are also political gains, for example, when the uncovering of a case of corruption in a ministry represents a gain for opponents of the Government.

Gain types

Some types of profit are:

  • Minimum profit: It is the minimum profit required to proceed with a project or activity.
  • Average profit: It is the average profit that a company obtains in a certain period of time, or the average profit of the companies in a sector.
  • Extraordinary income: There is the concept of extraordinary income tax as an exceptional tribute that is imposed for those firms that, for example, in times of a certain crisis (such as a health pandemic) have increased their profit.
  • Capital gain: It is the benefit obtained from the sale of various assets, specifically, financial instruments and real estate.
  • Exchange gain: It is an extraordinary income generated by the variation of the exchange rate. For example, if I live in Mexico and have savings in dollars, if the exchange rate of the dollar increases with respect to the Mexican peso, I have obtained an exchange gain.

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