1. In the charts of accounts, one class of accounts is allocated to income and another to expenses.
The difference between total income and total expenses is the result. The term "income statement" given to the summary of flows, previously divided between the "operating account" and the "profit and loss account", comes from this.
2. An 64 entity's primary product is specific to its category.
In the sense of the word "product" in economic accounting65, the main product is normally:
3. Expenses Comptabilite_Charge always include operating expenses.
Capital expenditure is investment. The accounting of operating expenditure entails, on the expense side, a debit from a flow account. The accounting of capital expenditure involves, on the investment side, a debiting of the stock account (balances recorded in the balance sheet are debit on the assets side, accounts payable on the liabilities side).
4. Equipment or debt amortization allowances are expenses.
In enterprises, equipment depreciation allowances are part of the expenses. Debt amortisation expenses, including interest and principal repayments, are in fact expenses outside of enterprises: individuals, non-commercial associations, public entities66.
5. An expense is either a charge or an investment.
In this respect, all economic entities are in the same boat. Whoever buys equipment Equipement makes an investment that increases his stock of assets – which increases his wealth. Whoever buys a supply consumed by this equipment is making an expense which is a charge67. In no budget do variations in charges of any kind have the same immediate and future effects as variations in investments.
6. Income and cash flows are usually different.
The events generating the profit streams are exchanges or transfers. The generating events for cash flows are receipts and disbursements. Period after period, these flows are rarely identical. They differ in particular in the case of investment. While the latter is not part of the expenses, the disbursement of its cost is part of the cash outflows.
7. The universality of the principle of calculating the result should not be deceived.
The result68 is the difference between income and expenses. This principle applies to all economic entities. When the difference is negative, calling it a "loss" or calling the result a "loss" is always appropriate. However, this does not mean that using the noun profit or profit and the qualifier "surplus" to designate the positive difference between income and expenses is always relevant.
8. The result is savings or dissavings for only two categories of entities.
An individual who keeps his accounts in double entry records a periodic result, correct in his calculation principle if, in the case of a current loan, a debt amortisation allowance is deducted from the expenses. Depending on whether the result calculated in this way is positive or negative, there has been savings or dissavings over the period under consideration. The determinants of the result of a non-commercial association are the same as those of the result of an individual. Depending on whether the result is positive or negative, it increases or decreases the equity of the association or individual – the net position of the association or individual.
9. A surplus or deficit is cash or profit.
It is according to its calculation by cash accounting or by an income statement. In the first case, the surplus or deficit is cash and not profit. The distinction between the two types of surplus or deficit is still too little practiced in the art of well-explained accounts.