Accounting Basics
Income, expenses and profit
Income, Expenses and Profit
Accounting is keeping track of money in a business. The basic equation is: Profit = Income − Expenses. Income is all money received from selling goods or services. Expenses are all costs of running the business (rent, stock, salaries, electricity).
Example
Calculating Profit
Nomsa's Hair Salon (monthly):
Income:
Haircuts: R8 000
Braiding: R5 000
Products sold: R2 000
Total income: R15 000
Expenses:
Rent: R3 000
Products/stock: R2 500
Electricity: R800
Assistant: R4 000
Total expenses: R10 300
Profit = R15 000 − R10 300 = R4 700
Note
Remember
Profit is not income! Many people confuse the two. Profit is what's left AFTER paying all expenses. A business can have high income but still make a loss if expenses are even higher. Keep careful records of both income and expenses.
Key Vocabulary
AccountingKeeping track of money coming in and going out of a business
IncomeMoney received from selling goods or services
ExpensesCosts of running a business
ProfitIncome minus expenses — money left over
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Accounting
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