Accounting profit is the profit available for distribution to ordinary shareholders that is reached after deducting all the expenses from incomes. The following format is commonly used in the income statement that gives us the accounting profit. Accounting profit is different from cash flows that are totally cash-based. To reach the accounting profit you have to deduct depreciation and amortization expenses as these are non-cash items.
|
Sales Revenue |
500,000.00 |
|
Less: Sales return |
(10,000.00) |
|
Less: Trade discount |
(32,000.00) |
|
Net Sales |
458,000.00 |
|
Less: Cost of Goods sold |
(310,000.00) |
|
Gross Profit |
148,000.00 |
|
Less: Operating expenses: |
|
|
Selling and administrative |
(35,000.00) |
|
Depreciation |
(13,000.00) |
|
Amortization |
(21,000.00) |
|
Profit before interest and taxes |
79,000.00 |
|
Less: Interest cost |
(22,000.00) |
|
Profit before tax |
57,000.00 |
|
Less: Taxes |
(18,000.00) |
|
Profit after tax |
39,000.00 |
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