Accounting For Dummies®, 4th Edition

Chapter 4. Reporting Revenue, Expenses, and the Bottom Line

In This Chapter

• Taking a look at a typical income statement

• Getting inquisitive about the income statement

• Becoming more intimate with assets and liabilities

• Handling unusual gains and losses in the income statement

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 at least avoid a deficit.) Accountants are the designated financial scorekeepers in the business world. Accountants are professional profit-measurers. I find profit accounting a fascinating challenge. For one thing, you have to understand how a business operates and its strategies in order to account for its profit.

Making a profit and accounting for it aren't nearly as simple as you may think. Managers have the demanding tasks of making sales and controlling expenses, and accountants have the tough tasks of measuring revenue and expenses and preparing reports that summarize the profit-making activities. Also, accountants are called on to help business managers analyze profit for decision-making, which I explain in Chapter 9. And accountants prepare profit budgets for managers, which I cover in Chapter 10.

This chapter focuses on the financial consequences of making profit and how profit activities are reported in a business's external financial reports to its owners and lenders. In ...