For every student, mathematics can be horrifying. But not if you persuade it correctly. As you know, everything in life requires the right kind of approach and so does mathematics. So, profit and loss is one such topic of this subject which can get a little tricky at times, but Profit and Loss Account Homework Answers will walk you through it with ease.
Letâ€™s delve into the topic:
What is profit and loss account?
So, a profit and loss account is a financial statement which summarizes the cost, revenues and expenses incurred during a given time period which is normally a fiscal quarter or a year.
Maintaining these records give the company an idea about its future abilities or backlogs. So, in any case the company will know whether to increase revenue or do cost cutting in order to generate profit.
Profit and loss account is also termed as income statement, statement of profit and loss, statement of operations, income and expense statement and statement of financial results.
Breaking it down further:
Profit and loss accounting or commonly known as income statement is one of the three financial statements that a business firm issues quarterly and annually along with a cash flow statement and a balance sheet.
Like the cash flow statement, the profit and loss account also shows the changes in the account over a certain period of time. But, on the other hand,balance sheet is like a snapshot of everything owed and owned by a particular company.
Hence, it is essential to tally the income statement with the cash flow statement because according to the accrual method of accounting, logging of expenses and income can happen before the money goes from one and top another.
So, the profit and loss account begins with the entry of income which is known as â€œtop lineâ€ and deducts the expenses of doing a business, including the cost of products sold, operating expenditure, tax expenditure and finally the interest expenditure.
The difference between them which is known as the bottom line is the net income which is also known as profit or earnings. Profit and Loss Account Homework Answers will give you a clear understanding of all the topics that have a mention above.
What is the difference between profit and income?
This is a frequently asked question by students who study Profit and Loss Accounting in grave details. According to many people, profit and income usually mean the same.
But, that is not the case because both of them have certain different properties. It can get confusing because essentially they mean the same but to distinguish them further the term â€œnetâ€ is placed as a prefix for the two words.
This way there calculation and definition will be different. Income is the total revenue generated from a certain deal. However, profit is the final revenue that you get after paying all your dues and rents.
Also, a business firmâ€™s margin of profit is often stated as net margin of profit (that is the companyâ€™s net income divided by its net sales). Not just this. The word â€œnetâ€™ also helps distinguish between net profit and gross profit. You can be sure to differentiate between the two with Profit and Loss Account Homework Answers.
How can you prepare a Profit and Loss account yourself?
- Maintain accurate and spotless records of the time period you require
- Keep a track of how much revenue your business churns
- Also, keep a track of the amount you spend to operate your business
- Deduct the expenditures from your revenue and calculate your profit
What is the difference between a balance sheet and profit and loss statement?
The main difference between profit and loss accounts and balance sheet is that it involves respective time period treatments.
The balance is a summary of the financial position of the company for a specific point in time. On the other hand profit and loss statement is a summary of expenditures and revenues over a set period of time.
When both of them are come to the picture together with other financial statements then it is put to use to assess the operational efficiency, organizational direction of a business firm and year to year to consistency of that firm.
For this reason, a strict scrutiny of documents needs to happen by investors and business owners.
Although the presentation of each statement will vary from industry to industry but large discrepancies of any one document on a yearly basis can be a warning you need to watch out for.
Profit and Loss Account Homework Answers can be your perfect guide in the journey of understanding this topic.
How can Profit and Loss Account Homework Answers help you?
Decoding formulas and preparing statement can be a taxing job but with homework answers, consider your job easy.
Profit and loss is a topic which can prove useful in your daily life. So, homework answers teach you in a way which will help you relate to the subject better.
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Homework answers also teach you how to frame proper answers using diagrams and examples. This will definitely help you fetch more marks in all your assignments.
It also deals with the difficult parts of the subject in a systematic way. Therefore, students who do not have a strong grip over the topic can easily understand and attempt questions in exams
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