Profit is a common definition familiar to almost everyone from early childhood. In a modern open economic space, profit is a basic indicator of the effectiveness of an enterprise. The difference between profit and other financial instruments is that most often it expresses real income in cash. The presence of a stable income always characterizes a developing enterprise, the presence of a competent managerial staff and sufficient resources to implement a development strategy in the long term.
Profit and loss accounting is of paramount importance to the accounting department of the organization. This system is designed to ensure transparency and reliability of data on incoming to the enterprise and the funds spent by it. The accuracy of such information makes it possible to plan production on time, to make settlements under current contracts, and to pay employees uniformly and on time. Accounting specialists of any organization, keeping records of profit and loss, bear great responsibility for the proper and conscientious performance of their work duties. Profit and loss accounting is the most important task of accounting when calculating the financial result of an enterprise.
Of course, talking about profit is most pleasant, but, unfortunately, in the course of the economic and financial activities of the enterprise, it may also incur losses, among which there is often an article such as unplanned losses. In some organizations, when planning a budget for deferred expenses, a certain amount is laid in it, which will be used to cover unforeseen losses if they occur. This approach allows you to optimize the budget.
It is not so difficult to formulate the main task of the existence of any enterprise, every beginning economist knows that this is maximizing profits and minimizing losses. The larger the gap between these tasks towards the first, the more effective the activity is considered, since there is nothing more revealing than profit.
According to paragraph 4 of the PBU document 9/99, the classification of the enterprise’s income is provided for depending on their nature, conditions for obtaining and the direction of the organization itself. So, income is divided into profit from ordinary activities, operating profit, extraordinary and non-operating income. In addition to all, profit and loss accounting aims to distinguish between items of income. In this case, income that is not classified as profit from ordinary activities, it is customary to attribute to the category of "other income". The situation is fundamentally the same with the expenditure side of the balance sheet. Those items of expenditures that are not the main ones are usually written off to other expenses. When accounting for accounting entries, it is worth paying attention to the profit indicators, since they are also different.
Any entrepreneur initially relies on an indicator of net profit minus all taxes, fees, expenses and other payments, since budgeting in the presence of gross profit can be a very rash decision. In the case of profit and loss, the moment of their recognition is especially relevant. In the case of, for example, lawsuits, profit or loss can only be recognized after a final court decision is made.
Summing up, we can also say that accounting for profits and losses in their real amount at each enterprise is a confidential procedure, the results of the statistical calculations of which are available only to the company's shareholders and state audit bodies.