Explain the usefulness of the concept of “profit” to users of accounting information.

Expert Solution

The concept of profit stands with margin that can be added to the total costs to value the product/ service which is provided to customer. The profit is the reward to the owner of the business for the coming up with business ideas and employing initial capital to give actual shape to the ideas of business. The better the product/service, the higher the profit attached to it.

The accounting information users are having figures like revenues and the costs like expenses on conceptualizing, production and marketing of the product/service. The users can draw the profit out of the figures so provided to them.

The profit is also the life-line of any business. It there is no profit, then one day the loss will eat-away the whole capital of the business and make it non-operational.

The volume of the profit will depend on the owner expectations and premium provided by the market/customers. So, the profit concept is also attached to the demand of product/service, here higher the demand, higher would be the profit. Also, higher the quality/value of the product/service, the more will be the profit on it.

Thus,the user of accounting information will have to understand profit concept and its usefulness to the business, through many directions.

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ekkarill92 answered 1 year ago

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Explain the usefulness of the concept of “profit” to users of accounting information.

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Expert Solution

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