Profit or Loss (value positive or negative respectively) is defined in accounting as the difference between revenues and expenses for the reporting period:
$$\text{Profit or Loss} = \text{Revenue} - \text{Expense}$$
Revenues are the income of the reporting period that results in an increase in assets or a decrease in liabilities and increases the equity of the entity. Contributions by owners to equity are not considered revenues.
Expenses are the outflows during the reporting period that result in a decrease in assets or an increase in liabilities and decrease the equity of the entity. Distributions to owners from equity are not considered expenses.
Profit FAQ
What is profit?
It is the difference between revenues and expenses for a period.
Why does it matter?
It shows whether a business generated a surplus or a loss.
