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When a business's costs and expenses exceed its revenues, it incurs a financial loss. This situation can lead to unsustainable operations if it persists, prompting the business to reassess its pricing strategy, reduce expenses, or find ways to increase sales. If not addressed, ongoing losses may result in cash flow problems and ultimately threaten the viability of the business. In extreme cases, it may lead to insolvency or bankruptcy.
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What is projected income statement?
Projected Income Statement normally includes your estimated future Business Revenues, Cost of Goods Sold, Gross Profit, Controllable Expenses, Non-Controllable Expenses and Net Profit. This statement is utilized to project your financial future in your business.
Why Expenses are debited and Revenues are credited?
Expenses are debited because they represent outflows or uses of resources that decrease equity, reflecting the cost of doing business. When an expense is incurred, it increases the total expenses on the income statement, which reduces net income and, consequently, equity. Conversely, revenues are credited because they signify inflows of resources that increase equity, representing income earned from business activities. This duality ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced.
Why should cost be matched with revenues at the end of an accounting period?
You compare income with expenses to see how much profit you have made.
How do you compute gross profit?
Gross profit is the difference btwn trading revenues (i.e. sales, closing stock etc.) and trading expenses (i.e. purchases. opening stock, freight, wages, etc.) + Earned Revenues (from the sale of the usual business products or services) - Cost of Goods Sold (the direct cost of the business product or services that were sold above) -------------------------- = Gross Profit (also called Gross Margin)
Which accounts are totaled to determine net income before federal income tax acounting?
Net income before federal income tax is calculated by totaling revenues and gains, then subtracting expenses and losses. This includes operating revenues, non-operating revenues, and any extraordinary gains. From this total, all operating expenses, cost of goods sold, interest expenses, and other relevant expenses are deducted. The resulting figure reflects the company's profitability before accounting for federal income taxes.
When total cost exceeds total revenues a business has registered?
A loss.
A segment of a business responsible for both revenues and expenses would be called?
cost center
What is projected income statement?
Projected Income Statement normally includes your estimated future Business Revenues, Cost of Goods Sold, Gross Profit, Controllable Expenses, Non-Controllable Expenses and Net Profit. This statement is utilized to project your financial future in your business.
When total revenues exceed total cost a business has registered?
A loss.
Why Expenses are debited and Revenues are credited?
Expenses are debited because they represent outflows or uses of resources that decrease equity, reflecting the cost of doing business. When an expense is incurred, it increases the total expenses on the income statement, which reduces net income and, consequently, equity. Conversely, revenues are credited because they signify inflows of resources that increase equity, representing income earned from business activities. This duality ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced.
How do you calculate net profit percentage?
{Revenues-(Cost of Goods Sold+Operating Expenses+Other Expenses+Interest+Tax and Non Tax Expenses-Tax and Non Tax Income)/Revenues}*100 Or to put it simpler, you could use the equation; (net profit/turnover)*100
What is Cost of revenue what is operating expenses?
The cost of revenue is the cost to produce a product. Operating expenses are expenses that have to be paid in order to stay in business like rent, utilities, etc.
Why should cost be matched with revenues at the end of an accounting period?
You compare income with expenses to see how much profit you have made.
How do you compute gross profit?
Gross profit is the difference btwn trading revenues (i.e. sales, closing stock etc.) and trading expenses (i.e. purchases. opening stock, freight, wages, etc.) + Earned Revenues (from the sale of the usual business products or services) - Cost of Goods Sold (the direct cost of the business product or services that were sold above) -------------------------- = Gross Profit (also called Gross Margin)
If the cost of cleaning a rental exceeds the deposit amount is the renter liable to pay the excess?
Yes, if the expenses are justified.
What is financial costing?
Financial cost is that cost which is incurred by the business to arrange finance for business like interest expenses or floatation cost etc.
Which accounts are totaled to determine net income before federal income tax acounting?
Net income before federal income tax is calculated by totaling revenues and gains, then subtracting expenses and losses. This includes operating revenues, non-operating revenues, and any extraordinary gains. From this total, all operating expenses, cost of goods sold, interest expenses, and other relevant expenses are deducted. The resulting figure reflects the company's profitability before accounting for federal income taxes.
