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A short time ago I was reading an article about accounting and the ABC’s of accounting and was fascinated by the two main ways to prepare an annual profit and loss statement. I learned that this line of questioning could be answered with quick research into what those two entities are and how they are used.
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While being an accountant, I learned that the standard form of an annual profit and loss statement can be filed in one long period. My research tells me that this is in effect the most commonly utilized accounting system of the business world. It has been in use since 1924. This leaves many businesses in the world to use the same system or some other form of accounting.
The Profit and Loss Statement is what accounts for the results of a business to determine its profit or loss for a year. If a business has been operating for a long period it has likely used the standard profit and loss statement.
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Profit has many definitions; a profit is the amount of money a business can gain from an asset or service. The main financial characteristic of any business is what profit can be generated. This can be achieved in many ways. Of course, one of the most popular is simply cutting cost on how a business is run.
There are other ways that a profit can be generated, the most common being the selling of an asset or service to another company. Sell their profit to another company for a fixed amount of money, and then sell the profit back to the original company. This usually creates a profit for the business owner. All of these methods are often referred to as a turn.
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Another form of profit is rent. Rent is any profit earned by an owner because of his or her ownership of a property. All profits are usually made by an owner from renting the property or services to another business. If this is an owner with a franchise then their profits will be referred to as franchise earnings.
Profit is a very valuable figure to have. It can be used to determine the profitability of the business. If a business is earning money, its profit should be considered the real profit of the business.
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