Professional Documents
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Accounts
Accounts
made the receipt of revenue possible. As we have discussed above that there are two
streams of earnings direct (earnings from main activities) and indirect (earnings from
other activities) therefore, we calculate profits at two levels i.e. gross profit and net
profit.
Gross profit is the amount of revenue from which trading expenses has been deducted
i.e. expenses related to main activities of the business.
Net profit is the amount of revenue that includes incomes from other activities as well
and all such expenses has been deducted which were incurred towards main activities as
well as other activities.
Gain is what business earns on selling such assets which is not an inventory of the
business. Simply put, this sales activity is not the actual trading of the business and is
not among those goods that business sell on regular basis. Some of you might be asking
a question that what is the difference between gain and income then? Well the term
gain is used to represent such earnings which are definitely from such activities which
are other than main operations but with an additional condition i.e. it is what we earn on
selling business asset which is usually fixed asset of the business. Where as income is
not just gain from sale of asset. Income includes gain and other earnings like dividends
received, interest income etc.
Limitations of Accounting
1. Financial accounting is of historical nature
Net effect of transactions are recorded in financial accounting which has
happened in past. These accounts is just post-mortem of all events of business in
past .These record does not help for future planning and other managerial
decisions. Financial accounting shows the profitability of business but it is failure
to tell that is it good or bad. Financial accounting is also failure to know the
reasons of low profitability position.
Accounts of business are made by a way which shows only overall profitability .It
does not shows net profit per product , or per department or according to job .
Thus to find difficult to all activities which do not give profit. So, it creates
inefficiency in business activities.
Financial accounting does not help business organization for controlling the cost.
Because, there is no provision of controlling cost in it. In financial accounting, we
write cost, if we paid any expenses. Thus there is no provision of improvement in
financial accounting. Except this, there is no any other way to inspect all
expenses.
2nd Reason
Accounting have many different area of specialize . You can make specialize in
making and maintaining of accounts , internal auditing , Forensic Accounting ,
independent auditing , management accounting or cost accounting .So in
accounting you can make your personality with your specialization . For this you
have to study accounting .
3rd Reason
Accounting subject can provide lot of jobs growth opportunities because every
company need an accountant . So , they hire accountant and you can make your
career in it .
4th Reason