AQA · GCSE · Business
Course version: 8132 · Version from Sept 2017
Understand the concept of revenue, costs, profit and loss
Full specification wording
Financial terms and calculations: understand the concept of revenue, costs, profit and loss
Revenue is the money a business receives from selling its output, calculated as price × quantity sold.
Checked against the AQA 8132 specification (opens in a new tab) on .
- Point 6 of 10
- 4 key terms
Study notes
From the checked teaching notes for this specification point.
The idea
Revenue is the money a business receives from selling its output, calculated as price × quantity sold. Costs are the payments made to produce that output, split into fixed and variable elements. Profit is what remains when total costs are subtracted from revenue: profit = revenue − total costs. If costs exceed revenue, the business makes a loss. For example, selling 500 units at £10 gives revenue of £5,000; if total costs are £4,200, profit is £800. If total costs were £5,600, the result would be a loss of £600. These concepts connect directly to pricing, sales volume and cost control, and they explain why a business may trade at a loss while still generating revenue. Understanding the relationships allows a student to evaluate financial performance and suggest realistic improvements.
What earns the marks
- Defines revenue as price × quantity sold and applies the formula to a numerical example.
- Defines costs as the total outlay of the business, including fixed and variable elements.
- States profit = revenue − total costs and calculates a profit figure correctly.
- Explains that a loss occurs when total costs are greater than revenue and calculates a loss figure correctly.
- Interprets a profit or loss result in context, for example linking it to pricing, sales volume or cost control.
- Distinguishes revenue from profit, recognising that high revenue can still produce a loss if costs are higher.
Common mistakes and how to put them right
Confusing revenue with profit.
Put it right: Revenue is total income from sales, while profit is revenue minus total costs.
Calculating profit as revenue minus variable costs only.
Put it right: Subtract total costs, including fixed costs.
Ignoring the negative sign or wording when costs exceed revenue.
Put it right: State clearly that the business has made a loss of the difference.
Exam tips
- Write the formula profit = revenue − total costs before substituting figures so the method is visible.
- Check whether the question asks for revenue, profit or loss, and answer with the correct term and units.
- When a loss arises, explain one realistic action such as raising price, increasing sales volume or reducing costs.
Try the lesson
The start of the Financial terms and calculations: understand the concept of revenue, costs, profit and loss lesson, made from checked teaching notes for this specification point.
Have a go first
A shop sells 50 items at £10 each. What is the shop's revenue from these sales?
Listen
Revenue is the money a business receives from selling its output, calculated as price × quantity sold. Costs are the payments made to produce that output, split into fixed and variable elements. Profit is what remains when total costs are subtracted from revenue: profit = revenue − total costs. If costs exceed revenue, the business makes a loss. For example, selling 500 units at £10 gives revenue of £5,000; if total costs are £4,200, profit is £800. If total costs were £5,600, the result would be a loss of £600. These concepts connect directly to pricing, sales volume and cost control, and they explain why a business may trade at a loss while still generating revenue. Understanding the relationships allows a student to evaluate financial performance and suggest realistic improvements. A strong answer earns marks for these points. Defines revenue as price × quantity sold and applies the formula to a numerical example. Defines costs as the total outlay of the business, including fixed and variable elements. States profit = revenue − total costs and calculates a profit figure correctly. Explains that a loss occurs when total costs are greater than revenue and calculates a loss figure correctly. A common slip: Confusing revenue with profit. Instead, revenue is total income from sales, while profit is revenue minus total costs. Exam tip: Write the formula profit = revenue − total costs before substituting figures so the method is visible.
Key words
Say what each word means before you turn the card.
Revenue
Try answering aloud or in your head before turning the card.
Costs
Try answering aloud or in your head before turning the card.
Profit
Try answering aloud or in your head before turning the card.
Loss
Try answering aloud or in your head before turning the card.
See every definition
- Revenue
- The money a business receives from selling its output, calculated as price × quantity sold.
- Costs
- The payments made to produce output, split into fixed and variable elements.
- Profit
- What remains when total costs are subtracted from revenue: profit = revenue − total costs.
- Loss
- The result when costs exceed revenue, meaning total costs are greater than revenue.
There is more to this lesson
The full lesson goes on to check your understanding and help you earn the marks. Create a free account to carry on, with your progress saved.
A week of Premium from your first lesson · Then the free plan continues · No card, no charge
Test your understanding of Financial terms and calculations: understand the concept of revenue, costs, profit and loss
Active recall beats re-reading. Take an instant quiz now to test what you’ve learned and lock it into long-term memory.
A week of Premium from your first lesson · Then the free plan continues · No card, no charge