Proceeds Vs. Profits: What’s The Difference?

Business Terms

There are many terms in finance and business that get tossed around without any real explanation as to what they mean. Both proceeds and profits have to do with money made from sales and other transactions, but what’s the difference between the two?

Profits are the money made minus the cost of the goods sold. There are other specific types of profit, but it’s important to note that profit always includes the cost of the goods sold. Proceeds, on the other hand, are the whole amount of money received.

Key Takeaways:

Proceeds	Profits
Proceeds are the entire amount received in income.	Profits are only the amount received over the cost of buying the goods sold.
The term proceeds are less often used in business or finance, with income or revenue preferred.	The term profits is a common business term. It’s a common calculation used to gauge the health and profitability of a business.
There are both gross proceeds and net proceeds.	There are gross profits, net profits, operating profits, and a profit margin.
When used instead of revenue, it can be referred to as the top line.	Profits are sometimes referred to as the company’s bottom line due to where it appears on accounting forms.
The term was first used in 1665. The verb form’s first recorded usage was in the 14th century. The word derivation is from Latin and Anglo-French.	The word was first used in the 14th century. It comes from the Latin word profectus, which made its way through Anglo-French and into Middle English.

What Are Proceeds?

Proceeds is defined as “the total amount brought in,” or “the net amount received (as for a check from an insurance settlement) after deduction of any discount or charges.” The former definition is the one that’s going to be used in business most of the time. Many people also break it down into gross proceeds and net proceeds.

Proceeds is a less formal term than revenue or profit when it comes to business, but it still has typical meanings and times when it’s used properly. Here are some things to keep in mind.

The proceeds are the whole amount. When used without a modifier, proceeds refer to the whole amount received from a sale. This can be either a sale of goods, services, or assets.
There’s more than one type of proceeds. There are two types of proceeds:
- Gross proceeds. This is the entire amount received from a sale, not including any costs or the cost of the item itself.
- Net proceeds. Net proceeds are the amount that the seller receives after taking fees, taxes, and the like into account. Even in net proceeds, however, the cost of the item usually isn’t considered. This is especially the case in real estate and capital gains.
It’s always pluralized. When using proceeds as a noun to refer to payment, it’s always plural. When used in the singular form, it’s the verb “to proceed,” as in, to move forward.
It’s been used as a word in English since 1665. Since that time, it had the first definition of “the whole amount.” The second, more specific definition came into use later.
The verb form of the word is older. That term first came into use in the 14th century. It came from Latin’s procedere. The word was formed from pro-, meaning forward, and cedere, which meant to go. It became proceder in Anglo-French, before transforming into proceden in Middle English.

What Are Profits?

Profits are the amount of income over the cost of the goods sold. Profits always take the cost the seller paid for the item into account. This is why something can be referred to as “pure profit” – as in, there was no cost, or a negligible one, for the business to acquire the item.

Here are some other things to keep in mind about profits.

Profits always take the cost of the item being sold into account. While profits typically don’t consider other types of costs, they always subtract the cost paid for the goods in question. The basic calculation for profits is to subtract the cost of the goods sold from the total amount of money made from sales.
They’re sometimes referred to as the bottom line. This is a term most people have heard used in a movie or a television show. It’s called the bottom line because it typically appears on the bottom line of the accounts.
There are more than one type of profit. As with proceeds, there are profits that are calculated in different ways and they, of course, have different names.
- Gross profit. This is the type of profit that people typically mean when they just say profit. The gross profit is calculated by the equation up above: the money made from sales minus the cost of the goods sold.
- Net profit. As is the case when the net is used as a descriptor, this takes more costs into account than the gross amount. Net profits consider other expenses in the sale of the goods, such as discounts, specials, and bulk discounts.
- Operating profit. As with net profit, this takes more costs into account. In this case, the operating costs are subtracted from the gross profit. It also takes into account less direct expenses such as the amortization or depreciation of the goods.
- Gross profit margin. While not a direct profit calculation per se, the gross profit margin is related to profit calculations. This is calculated by dividing the gross profit by the sales. This shows you how much of the money that you brought in was profit. As a rule, the higher, the better.
The word’s first known usage was in the 14th century. The word profit has been in use in English for a long time. It originally comes from the Latin word profectus, which meant an advance or profit. From there, it went through Anglo-French and into Middle English.

Proceeds vs. Profits FAQ

What’s the difference between income and profit?

The difference between income and profits is that income is the entire revenue received through a period, while profit is the money made off the top of sales.

Income can refer to money obtained in any way, either by a paycheck, sales, services, rent payments, or sales of assets. Income is not necessarily profit, but profit is always income.
Is revenue the same as profit?

No, revenue is not the same as profit. Revenue includes all the money brought in during a period. Profit, on the other hand, is the only money made over the top of other costs. Revenue can include other types of income as well, such as sales of assets, insurance settlements, and other non-typical payments.

Business Terms

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Author

Di Doherty

Di has been a writer for more than half her life. Most of her writing so far has been fiction, and she’s gotten short stories published in online magazines Kzine and Silver Blade, as well as a flash fiction piece in the Bookends review. Di graduated from Mary Baldwin College (now University) with a degree in Psychology and Sociology.

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