Distinguish between the operating-profit, all-inclusive and comprehensive income approaches to profit measurement.

Expert Solution

operating profit

It Refers to Profit Earned over performing operations

I:e Operating income minus operating cost.

Comprehensive income

It is the sum of net income and other items of income which are not directly related to business

Net Income: sales minus cost

Operating profit is exact measurement of business in which company deals as it includes only items related to main business whereas comprehensive income includes all the income which are earned from various sources whether related to business or not.

Particulars 1st method 2nd method

Revenue from operations 100000 50000

Interest income (or any Other) 25000 50000

Cost of sale 70000 70000

Net Income 55000 30000

operating profit 30000(100000-30000) 30000

If interest income is accrued only in that year which is not regualar then the profit will be -20000

when comparing the financial statemnts of the above two methods though the company is earning profit in the second method but actually it incurred losses in its operations so while taking investment decision or any other decision for future opearting profit is to be considered rather than comprehensive inocme

above Interest income is the income earned from not ordinarily course of business.

ekkarill92 answered 2 years ago

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Work & Rest is an all inclusive hotel operating as a monopoly in a mid-sized community....

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Question

Distinguish between the operating-profit, all-inclusive and comprehensive income approaches to profit measurement.

Solutions

Expert Solution

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