Starting a Business All-in-One For Dummies, 2nd Edition

Chapter 2

Reporting Profit or Loss in the Income Statement

IN THIS CHAPTER

Looking at typical income statements

Being an active reader of income statements

Asking about the substance of profit, assets, and liabilities

Handling out-of-the-ordinary gains and losses in an income statement

Correcting misconceptions about profit

This chapter lifts up the hood and explains how the profit engine runs. Making a profit is the main financial goal of a business. Accountants are the profit scorekeepers in the business world and are tasked with measuring the most important financial number of a business. Be warned that measuring profit is a challenge in most situations. Determining the correct amounts for revenue and expenses (and for special gains and losses, if any) to record is no walk in the park.

Managers have the demanding tasks of making sales and controlling expenses, and accountants have the tough job of measuring revenue and expenses and preparing financial reports that summarize the ...