Accounting For Dummies, 5th Edition

Chapter 4

Reporting Profit

In This Chapter

Taking a look at typical income statements

Getting inquisitive about the substance of profit

Becoming more intimate with assets and liabilities

Handling unusual gains and losses in the income statement

Correcting misconceptions about profit

In this chapter, I lift up the hood and explain how the profit engine runs. Making a profit is the main financial goal of a business. (Not-for-profit organizations and government entities don’t aim to make profit, but they should break even and avoid a deficit.) Accountants are the profit scorekeepers in the business world and are tasked with measuring the most important financial number of a business. I should warn you right here that measuring profit is a challenge. Determining the correct amounts for revenue and expenses to record is no walk in the park.

Managers have the demanding tasks of making sales and controlling expenses, and accountants have the tough job of measuring revenue and expenses and ...