9 Making A Profit

9 Making A Profit



Making a​ Profit
Accountants are responsible for preparing three primary types of​ financial statements for a​ business .​
The income statement reports the profit-making activities of​ the business and the bottom-line profit or​ loss for a​ specified period .​
The balance sheets reports the financial position of​ the business at​ a​ specific point in​ time, ofteh the last day of​ the period .​
and the statement of​ cash flows reports how much cash was generated from profit what the business did with this money.
Everyone knows profit is​ a​ good thing .​
It's what our economy is​ founded on .​
It doesn't sound like such a​ big deal .​
Make more money than you spend to​ sell or​ manufacture products .​
But of​ course nothing's ever really simple, is​ it? a​ profit report, or​ net income statement first identifies the business and the time period that is​ being summarized in​ the report .​
You read an​ income statement from the top line to​ the bottom line .​
Every step of​ the income statement reports the deduction of​ an​ expense .​
The income statement also reports changes in​ assets and liabilities as​ well, so that if​ there's a​ revenue increase, it's either because there's been an​ increase in​ assets or​ a​ decrease in​ a​ company's liabilities .​
If there's been an​ increase in​ the expense line, it's because there's been either a​ decrease in​ assets or​ an​ increase in​ liabilities .​
Net worth is​ also referred to​ as​ owners' equity in​ the business .​
They're not exactly interchangeable .​
Net worth expresses the total of​ assets less the liabilities .​
Owners' equity refers to​ who owns the assets after the liabilities are satisfied.
These shifts in​ assets and liabilities are important to​ owners and executives of​ a​ business because it's their responsibility to​ manage and control such changes .​
Making a​ profit in​ a​ business involves several variable, not just increasing the amount of​ cash that flows through a​ company, but management of​ other assets as​ well.




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