Profit and loss account concepts, Accounting Basics

PROFIT AND LOSS ACCOUNT CONCEPTS:

The initial point in accepting the profit and loss account is to be clear about the

Significance of "profit". Profit is the return for taking risk. Profit has a significant role in assigning resources (land, labour, capital and enterprise). Put basically, falling profits indication that resources should be taken out of that business and put into one more one; increasing profits signal that resources should be stimulated into this business. The major task of accounts, so, is to monitor and measure profits. Profit = Revenues less Costs. So observing profit also means measuring and  monitoring revenues and costs. There are two parts to this:-

1) Recording financial data. This is the 'book-keeping' part of accounting.

2) Measuring the result. This is the 'financial' part of accounting. Profits are 'spent' in three ways.

1) Preserved for future growth and investment.

2) Returned to owners, example, a 'dividend'.

3) Paid as tax.

Posted Date: 10/15/2012 5:24:16 AM | Location : United States







Related Discussions:- Profit and loss account concepts, Assignment Help, Ask Question on Profit and loss account concepts, Get Answer, Expert's Help, Profit and loss account concepts Discussions

Write discussion on Profit and loss account concepts
Your posts are moderated
Related Questions
Q. What is Variable cost? Variable cost -- a cost which changes as production or sales change. If a business is producingnothing and selling nothing, variable cost must be zero

Ledger is said to be the principal book entry and the transactions can even be directly entered into the ledger account.” Elaborate and explain why journal is necessary.

#questiSean Corp. issued a $60,000, 10 year bond at the face rate of 8% annually on 1/1/X0. The market rate was 10%. How much cash will the bond investors receive at the end of the

what is the mission of the Accounting and Finance Functional Area


Q. Financial statements in European countries? In a few European countries the financial statements contain secret reserves. These secret reserves occur from a company not repo

Q. Explain about Going-concern concept? Except strong evidence exists to the contrary accountants assume that the business entity will continue operations into the indefinite

Pro forma Financial Statements In accounting, a financial statement in which the amounts begin are fully or partially estimates; from the Latin for "as a matter of form."

the consequences of non-compliance of each of the accounting concepts.