Profits: Excess of revenue over expense is known as profit. It is normally categorized into ’ gross profit or net profit. It increases the owner’s capital as it is added to the capital at the end of each accounting period. For example: Goods costing Rs. 1,000 is sold at Rs. 1,200 then the sale proceeds of Rs.1,200 is the revenue and 1,000 is the expense to generate this revenue. Hence, accounting profit of Rs. 200 (i.e. Rs.1,200 – Rs. 1,000) is the difference between the revenue and expense that is earned by the business.

Gain: It arises from irregular activities or non-recurring transactions. In other words, a gain is a result of transactions that are incidental to the business, other than operating transactions. 

For example: an old machinery of book value Rs. 2,000 is sold at Rs. 2,500. Hence, the gain is Rs. 5,00 (i.e. Rs. 25,00 – Rs. 2,000). Here, the sale of the old machinery is an irregular activity; so, the difference is termed as gain. Thus, in other words the only difference between profit and gain is that profit is the excess of revenue over expense and gain arises from other than operating transactions.