0
In a way profit could be considered an asset but its a stretch. Profit is term used to describe the earnings left over after you subtract the expenses related to the earning of that profit. The retained earnings would actually be the asset. The term profit is just a way to tell if your business is making money (or profitable) and doesn't really fall into the asset category. You will not see profits on a balance sheet rather you will see earnings.
Amalia Crooks
Wiki User
∙ 15y agoIn a way profit could be considered an asset but its a stretch. Profit is term used to describe the earnings left over after you subtract the expenses related to the earning of that profit. The retained earnings would actually be the asset. The term profit is just a way to tell if your business is making money (or profitable) and doesn't really fall into the asset category. You will not see profits on a balance sheet rather you will see earnings.
Wiki User
∙ 13y agoAccording to the accounting terms that whenever you get net profit you transfer that to Liability side... Because you have to pay this ( Net Profit ) to your owner or Share Holders...., Thus we always consider that Net Profit is liability of the Company...,
Regards
Ahamadu
Add your answer:
Earn +20 pts
Net profit is a liability?
It is not because what makes you think what you have earned is not belonging to the company? with no profit, company will gone bankrupt easily if net profit is liability. if it is liability, who is the company owing the money to?
Is loss an asset or a liability?
Neither. A Net Loss is a reduction of Equity.
Retained earnings a asset or liability?
Retained earnings are non distributed profit part and hence a liability of the company to payback to the owners of company on case of dissolution that's why retained earning is liability and not the asset.
What is the asset turnover ratio if the profit margin is 5 percent and the return on assets is 13.5 percent?
ROA = Net Profit Margin * Asset Turnover Asset Turnover = ROA/Profit Margin = 13.5/5 = 2.7%
Is sales revenue an expense or asset?
Sales is a revenue not an expense or asset while difference between sales and expense is profit which is liability for business.
What is net liability?
Asset - Liability = Net Asset / Liability * Net Asset - When Asset is more than Liability * Net Liability - When Liability is more than Asset
Why is net profit treated as a liability?
Net profit for a business is liability because it must be paid to equity holder and creditors.
Net profit is a liability?
It is not because what makes you think what you have earned is not belonging to the company? with no profit, company will gone bankrupt easily if net profit is liability. if it is liability, who is the company owing the money to?
What is the effect on wrong treated revenue expenditure as capital expenditure?
The effects it would has on net profit and net asset is that there would be an increase in net profit and an increase in net asset as well
What is the effect on wrong treated capital expenditure as revenue expenditure?
The effects it would has on net profit and net asset is that there would be an increase in net profit and an increase in net asset as well
How do you define asset and liability?
An asset makes a profit, either on a periodic basis, or when you sell the asset. A liability is an expence on a periodic basis, or a loss is made when disposed off.ORAn asset is something which we own and liability is something which we owe.
Where is Profit and Loss post in balance sheet?
In case of profit Liability side. In case of loss Asset side.
Is loss an asset or a liability?
Neither. A Net Loss is a reduction of Equity.
Retained earnings a asset or liability?
Retained earnings are non distributed profit part and hence a liability of the company to payback to the owners of company on case of dissolution that's why retained earning is liability and not the asset.
What happens if revenue expenditure is recorded as a capital expenditure?
If that happens, there will be overstatment of the period's profit as well as overstatement of assets. This will reduce the future profit of business because the original costs of assets will be charged more to the Profit and Loss account in process of depreciation of assets.
How do you distinguish between an exposed net asset position and an exposed net liability position?
The difference between an exposed net asset position and an exposed net liability position, is that an exposed net asset position occurs when a company's trade receivables and other assets denominated in a foreign currency are greater than its liabilities denominated in that currency. An exposed net liability position occurs if a company's liabilities denominated in a foreign currency exceed receivables denominated in that currency.
How find net profit in business?
Net Profit is placed in the Credit Side of the Profit & Loss A/c. of the Company and added to the Capital in the Asset Side of the Balance Sheet.
