Accounting reports have many different phrases to refer to the same things.  They vary between countries and even between accountants.  12Faces has adopted a standard terminology for our materials.  However, if you or your accountants use a different terminology, the list below will assist translating from yours to ours.  yellow belt

 For a larger list of accounting terminology, Google a term or check this list of accounting terminology

Revenue

Revenue is the total amount of money generated by the sale of goods or services related to your company’s normal activities.
It can include amounts from interest, rent and dividends.

When analysing your business results, you would normally use the Income from Sales (Sales Revenue) when comparing with COGS and Overheads and similar information.

Also called: 

Cost of Goods Sold (COGS)

The costs involved in producing the goods and services you sell.

Typically this would include:

Also called:

Gross Profit

Gross Profit is the difference between Revenue and the cost of making a product or providing a service (COGS), before deducting overheads, payroll, taxation and interest payments.

Gross Profit = Revenue – COGS

Also called:

Overhead Costs

Overhead Costs are the expenditures which cannot be conveniently traced to, or identified with, any particular cost unit/product.
They are costs that do not change in direct proportion to the Revenue or production volumes.

Typically this would include:

Also called:

Operating Profit

Operating Profit measures the efficiency and profitability of a business based on its core business functions.

Operating Profit = Gross Profit – Overhead Costs

For a business, this may be different from the Profit reported for tax purposes. That will allow for any ‘tax friendly’ expenses that are independent of the realities of your business.

This might include such things as:

Also called:

When undertaking 12Faces analyses on your business, we encourage you to remove any such “one-off” Revenue and Expenses from the Profit figure you use.
This will ensure that you are working with the profitability of your business rather than a tax-minimising strategy, which may cause you to optimise for the wrong goal.

EBITDA 

The EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) starts with the Operating Profit you submitted.
It then adjusts to a Profit figure that better reflects where you want to be for management purposes.

To do this the EBITDA figure:

For further information on EBITDA go to the following link:

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