Gosh, that’s interesting

I don’t wish to knock profit. It’s important. But I also suspect that most users of accounts really do not know what it is.

Some might think it’s something tangible that they might see, or even physically count. But of course, it is not. It’s a residual. That’s because it is the difference between income and expenditure.

We can’t count residuals, eh? Makes a true buggery of attempts to tax what can’t be counted then.

15 thoughts on “Gosh, that’s interesting”

  1. A Murphyism, that business owners are not aware of their profit/loss situation.

    He raises the bar of stupid every day.

  2. Dennis, Crusher of Fools

    I don’t wish to knock profit. It’s important. But I also suspect that most users of accounts really do not know what it is.

    How to be an arrogant fuck in three simple sentences.

    This from the man who really doesn’t know what tax avoidance is.

  3. Tim, the accounting profit that Murphy thinks is the only reality cannot actually be counted because it not just the cash in the till but includes the change in the book value (as determined by accountants almost but not quite completely unlike Murphy) of the physical and intangible assets of the business.
    That doesn’t stop the government from trying to tax businesses – the government just sets up its own rules to calculate its own version of “profit” which differs from Murphy’s. Hence all the “deferred tax” items in company accounts where the HMRC definition of “taxable profits” differs from the ICAEW definition of “profits”.
    However, what the typical small business regards as profit – the money left in the till after paying wages and replacing stock *is* real and *can* be physically counted. Also, being better at maths than Murphy, I *can* (and do) count my profit on an HMRC accounting basis (I *could* on an ICAEW basis but there’s no point).

  4. John 7:7

    Shurely that’s why depreciation was invented? It’s wot got Tesco into trouble innit? That they had to replace their shelves every 7 years not every 8 years, something like that.

  5. Bloke in North Dorset

    “This from the man who really doesn’t know what tax avoidance is.”

    Oh yes he does. It means whatever he says it means, nothing more, nothing less.

  6. Dennis, CPA to the Gods

    What’re the odds that the tuber could explain what EBIDTA is without looking it up?

    EBIDTA to RM? Earnings Before I Decide The Amount.

  7. Some might think it’s something tangible that they might see, or even physically count. But of course, it is not. It’s a residual.

    That’s because it is the difference between income and expenditure.

    So, then . . . we can count it?

  8. Bloke in North Dorset

    Wasn’t it Alan Sugar who said that many a profitable company has gone bust? Or was he quoting someone else?

  9. @ BiG
    Yeah – BUT that was depreciation in reality not according to some formula dreamed up by the ICAEW or their overseas equivalent. The formula only occasionally matches (even approximately) reality.
    One of the most successful companies in Slovakia in the 1990s was Slovenska Armaturka Myjava because it was able to reinvest much of its cash flow since the sum it was required to remit to the communist state was reduced by its straight-line depreciation charge on all the equipment it still used including some that manufactured replacement parts on imperial standard units predating the German invasion so more than 50 years old. The Communist bureaucracy didn’t disallow depreciation on stuff already written down to zero lest others wanted to write off equipment less than 20 years old.

  10. Weekend Humour

    Lisa Nandy: A would-be Labour leader and the shambolic Friends of Palestine

    Anti-Semitism in the Labour Party has been widely and rightly publicised. The deeply misguided illusions of Labour Friends of Palestine and the Middle East have not received nearly enough attention. LFPME show who ‘girl next door’ Lisa Nandy really is…

    .

    Rebecca Long Bailey: I’ve been prolier than thou for 12,000 years, says Labour hopeful
    .

    Jess Philips: When ‘telling it like it is’ means saying nothing at all
    .

    Dear Mr Cummings

    I have seen your blog advertisement for corkscrew thinkers and wish to apply for the post….

  11. @gamecock “He raises the bar of stupid every day.”. Being pedantic it’s more like he lowers the bar but increases the volume.

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