What is Income?

Income is the earnings gained from the provision of services or goods, or from the use of assets. It is sometimes divided into earned income and unearned income, where earned income is generated from the sale of goods and services, and unearned income is the earnings generated from investments.

What is Profit?

Profit is the positive amount remaining after subtracting expenses incurred from the revenues generated over a designated period of time. This is a key performance measure for for-profit businesses.

Comparing Income and Profit

The terms income and profit have essentially the same meaning. They both refer to the amount of residual earnings that a business generates after all revenues and expenses have been recorded. However, there are some situations in which the meanings of the two terms can diverge. This is most commonly the case when an entity generates its cash inflows from the receipt of interest on its investments. In this situation, interest is considered to be the revenues of the entity, so that interest income is considered a top-line (revenue) item, rather than a bottom-line (profit) item.

Another difference is that there are several subsets of the profit concept, such as gross profit and operating profit. Gross profit is revenues minus the cost of goods sold, while operating profit is gross profit minus operating expenses. These measures appear as subtotals on the income statement.