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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 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)
In accounting classification What does element of expense represent?
In accounting, the element of expense represents the costs incurred by a business in the process of generating revenue. It includes various categories such as cost of goods sold, operating expenses, and non-operating expenses. These expenses are essential for maintaining operations and are subtracted from revenues to determine net income. Proper classification of expenses helps in financial reporting and analysis, providing insights into a company's performance and profitability.
The broad principle that requires expenses to be reported in the same period as the revenues that were earned as a result of the expenses is the?
The accruals concept, otherwise known as the matching concept as it's purpose is to match expenses and revenue to each other in the correct accounting period.
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.
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
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.
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.
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.
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)
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.
What is prime expense?
Prime Cost(Expenses) = Direct Material + Direct Labour
What is the importance of food cost control?
The importance of food cost control is to maintain profit margins for the business. In a restaurant food costs and labor are the highest expenses to the business.
