Question

50 POINTS FOR A TASK!
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WRITE AN ARTICLE ON HISTORY OF PROFIT AND LOSS (150-250words) ​

Answer 1

Answer:

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Step-by-step explanation:

Profit and loss accounts and balance sheets are two of the most useful tools to see how well a company is performing.

The profit and loss (P&L) account is a basic record of an organisation’s annual accounts. It will show how much the company has earned, how much it has spent to earn that amount and the difference between the two, which is the profit or loss made.

The P&L is calculated as follows: total sales minus the cost of those sales (also known as direct or variable costs) will give you the gross profit. Subtract from that the fixed costs (for example insurance, marketing, administration costs etc) to find the net profit. Tax payments and shareholder dividends must then be subtracted and an allowance can made for retained profit to reinvest in the business. This will give you a picture of performance over a particular period in time, either historical or forecast for the future.

Answer 2

hi mate,

Answer:

The Birth of Profit & Loss Account & A New Method to Compute Profits this article is the second of a trilogy that traces the origin of the three elements of financial statements, the balance sheet, the profit and loss account and the cash flow statement

Financial Statements consisting of the three- Balance Sheet, Profit and Loss Account and the Cash Flow Statements, form the core segment of corporate communication to stakeholders with financial interests. The three can be likened to a still photograph, a video film and a slow-motion replay of the video film.

Nineteenth century saw the advent of insurance business. A peculiar feature of insurance business is that premiums are collected in advance and assets insured for varying periods and in the case of life insurance for multiple years if not decades, which resulted in exposing the inadequacies of the Surplus Theory of computing profits.

Profit, for a long time in human history was computed as an increase in the owners’ net worth. While the total of all the assets that belonged to the owners was their gross worth, net worth was what they owned, which was computed by deducting all their borrowings and credits received by them. Profit was the increase in their net worth over a period, while a decrease was their loss. This was also called the Surplus Theory of Profit, as it was computed by comparing net worth at the beginning and end of the period to quantify the surplus.

As businesses evolved resulting in three critical developments, higher fixed assets investments, longer business cycles, and trade based on credit, the Surplus Theory of Profit became unreliable due to depreciation on fixed assets, timing mismatch between income and expenditure and the element of bad debts. The result was a new concept devised to measure profits, the Residue Theory of Profit.

i hope it helps you.