What defines revenue, profit and income?

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In the US, Generally Accepted Accounting Principles (GAAP) defines how to recognize all financial reporting metrics, including revenue, income and profit, as well as how to prepare income statements.

GAAP is the set of accounting rules set forth by the Financial Accounting Standards Board (FASB) that US companies are expected to follow when putting together their financial statements.

The goal of GAAP is to ensure that a chief of vp and training email lists company's financial statements are complete, consistent, and comparable. GAAP may be contrasted with pro forma accounting, which is a non-GAAP financial reporting method.

GAAP is used mainly in the US, while most other countries follow the International Financial Reporting Standards (IFRS).

Frequently Asked Questions (FAQs)
What's more important – profit or income?
Profit, or net income, is more important than revenue because it reflects the current financial health of a company after all expenses have been paid. While revenue indicates the total income earned from business operations, it does not account for the costs involved in generating that revenue. Profit shows the leftover money after operating costs, taxes, interest, and dividends are subtracted, making it an accurate measure of a company's financial success and sustainability. High revenue doesn't guarantee a healthy profit margin if expenses are too high, underscoring the critical role of efficient cost management and operational sustainability for long-term profitability.