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Abhijeet Sharma owns a business of supplying and manufacturing furniture and fixture. This company has received an order of supplying furniture of 2,00,000 for an office. He has shown it as a part of his profit. Is he correct in doing so?
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Abhijeet Sharma owns a business of supplying and manufacturing furnitu...
Analysis of Abhijeet Sharma's Situation
Abhijeet Sharma, who owns a business of supplying and manufacturing furniture and fixtures, has received an order for supplying furniture worth 2,00,000 for an office. He has included this order as a part of his profit. Let's analyze whether he is correct in doing so.
Understanding Profit Calculation
- Profit is calculated as the difference between total revenue and total expenses.
- Revenue includes all the income generated from sales, while expenses include all the costs incurred in running the business.
Is the Order Revenue or Profit?
- The order for supplying furniture worth 2,00,000 is a part of revenue, not profit.
- Profit is calculated after deducting all expenses from the total revenue.
- Including the order amount as profit can give a misleading picture of the actual financial status of the business.
Proper Accounting Treatment
- The order amount should be recorded as revenue in the income statement.
- To calculate profit accurately, all expenses related to fulfilling the order, such as manufacturing costs, labor costs, transportation costs, etc., should be deducted from the revenue generated by the order.
Conclusion
- Abhijeet Sharma should not consider the order amount as profit but as revenue.
- Accurate accounting practices require proper calculation of profit after deducting all expenses from revenue.
- It is essential to maintain transparency in financial reporting to make informed business decisions.
In conclusion, Abhijeet Sharma should accurately account for the order amount as revenue and not as profit to ensure the financial health of his business is represented correctly.
Abhijeet Sharma, who owns a business of supplying and manufacturing furniture and fixtures, has received an order for supplying furniture worth 2,00,000 for an office. He has included this order as a part of his profit. Let's analyze whether he is correct in doing so.
Understanding Profit Calculation
- Profit is calculated as the difference between total revenue and total expenses.
- Revenue includes all the income generated from sales, while expenses include all the costs incurred in running the business.
Is the Order Revenue or Profit?
- The order for supplying furniture worth 2,00,000 is a part of revenue, not profit.
- Profit is calculated after deducting all expenses from the total revenue.
- Including the order amount as profit can give a misleading picture of the actual financial status of the business.
Proper Accounting Treatment
- The order amount should be recorded as revenue in the income statement.
- To calculate profit accurately, all expenses related to fulfilling the order, such as manufacturing costs, labor costs, transportation costs, etc., should be deducted from the revenue generated by the order.
Conclusion
- Abhijeet Sharma should not consider the order amount as profit but as revenue.
- Accurate accounting practices require proper calculation of profit after deducting all expenses from revenue.
- It is essential to maintain transparency in financial reporting to make informed business decisions.
In conclusion, Abhijeet Sharma should accurately account for the order amount as revenue and not as profit to ensure the financial health of his business is represented correctly.
Community Answer
Abhijeet Sharma owns a business of supplying and manufacturing furnitu...
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Abhijeet Sharma owns a business of supplying and manufacturing furniture and fixture. This company has received an order of supplying furniture of 2,00,000 for an office. He has shown it as a part of his profit. Is he correct in doing so?
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Abhijeet Sharma owns a business of supplying and manufacturing furniture and fixture. This company has received an order of supplying furniture of 2,00,000 for an office. He has shown it as a part of his profit. Is he correct in doing so? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Abhijeet Sharma owns a business of supplying and manufacturing furniture and fixture. This company has received an order of supplying furniture of 2,00,000 for an office. He has shown it as a part of his profit. Is he correct in doing so? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Abhijeet Sharma owns a business of supplying and manufacturing furniture and fixture. This company has received an order of supplying furniture of 2,00,000 for an office. He has shown it as a part of his profit. Is he correct in doing so?.
Abhijeet Sharma owns a business of supplying and manufacturing furniture and fixture. This company has received an order of supplying furniture of 2,00,000 for an office. He has shown it as a part of his profit. Is he correct in doing so? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Abhijeet Sharma owns a business of supplying and manufacturing furniture and fixture. This company has received an order of supplying furniture of 2,00,000 for an office. He has shown it as a part of his profit. Is he correct in doing so? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Abhijeet Sharma owns a business of supplying and manufacturing furniture and fixture. This company has received an order of supplying furniture of 2,00,000 for an office. He has shown it as a part of his profit. Is he correct in doing so?.
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