Glossary · Also called Net profit
Profit for the year
What is left after every expense has been taken away from all the income for the year.
What it means
The final profit figure after deducting all expenses (and adding any other income) from gross profit.
Example
Gross profit less operating expenses gives the profit for the year.
Why it matters
It is the bottom line of the income statement and increases the owner's capital.
In practice
Profit for the year is the final figure at the foot of the income statement. Start with gross profit, add other income such as rent received or discounts received, then deduct all expenses such as wages, rent, insurance and depreciation. The result is added to capital in the statement of financial position, before drawings are subtracted.
Suppose gross profit is RM29,000, other income is RM1,000 and expenses total RM18,000. Profit for the year is RM12,000.
Students often confuse it with gross profit. Gross profit reflects only buying and selling. Profit for the year reflects the whole business after every cost. It also differs from the cash balance. Profit includes amounts owed and prepaid, so a business can report a profit while its bank balance falls. It can also hold plenty of cash and still make a loss.
If you lose marks on the order of the income statement, one of our teachers can work through past-paper layouts with you. Book a trial class.
Related terms
Syllabus reference: Cambridge 0452 and 0985, syllabus for 2027 to 2029, sub-topic 1.1 The purpose of accounting (page 11); sub-topic 6.2 Interpretation of accounting ratios (page 18).
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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