What is the difference between profit and income?

[Jenniferrichard]

In casual conversation, we often use "profit" and "income" as if they were the same thing. However, if you are looking at a financial statement or Accounting Services in Jersey City, the distinction between them is vital.

While both terms refer to money earned, they represent different stages of the financial journey.

The Core Distinction
The easiest way to remember the difference is by looking at what is "left over":

Income is a broad term that usually refers to the total amount of money an individual or entity receives. It is the "input."

Profit is a specific term that refers to the surplus remaining after you subtract all your costs from that income. It is the "net result."

1. Income: The "Inflow"
For an individual, income is the paycheck you receive or the dividends from your stocks. For a business, income is often used synonymously with Revenue—the total dollar amount generated by sales before a single bill is paid.

Gross Income (Individuals): Your total salary before taxes and health insurance are taken out.

Operating Income (Businesses): Money earned specifically from core business activities.

2. Profit: The "Surplus"
Profit only exists if your income is higher than your expenses. If you earn $100 but it costs you $110 to do the work, you have income, but you have a loss rather than a profit.

Gross Profit: Revenue minus the direct cost of making a product (like materials).

Net Profit: Often called the "bottom line," this is what remains after everything—taxes, interest, rent, and salaries—has been paid.

Why the Confusion?
The confusion often stems from the term "Net Income." In the accounting world, "Net Income" is actually the technical name for Net Profit. When a company says their "income was $1 million," they are usually referring to their profit. Conversely, when an individual says their "income is $70,000," they are referring to their gross salary before expenses.

A Simple Example
Imagine you run a lemonade stand:

You sell 50 cups for $2 each. Your Income (Revenue) is $100.

The lemons, sugar, and cups cost you $30.

You paid $10 to rent the table.

Your Profit is $60 ($100 - $30 - $10).

Key Takeaway: Income tells Accounting Services Jersey City; profit tells you how much money you are actually making.