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Essentially: accounting is an art. If you do not have profits, you pay less taxes, for example. Paper "losses" are a thing. Money losses are another.
by pfortuny 10y ago
Essentially: accounting is an art. If you do not have profits, you pay less taxes, for example. Paper "losses" are a thing. Money losses are another.
- __s 10y agoAccounting is a conart
- ptaipale 10y agoWell, no; it doesn't really even impact whether you pay dividends/taxes or not, but it does impact when you pay them. It's not that difficult to shift things across financial years, although eventually you'll show the profit/loss accurately, cumulatively.
- matt4077 10y agoThat's a very clueless way to answer their question. Accounting has several layers: - Cash flow: this is what you'd look at for your lemonade stand. Actual money comes in and goes out (either "cash cash" or you bank balance, both is "cash" in this regard) But that layer isn't the most important one for incorporated companies. Yes, running out of cash is a problem. But what usually / actually happens is failure on the "value" level: - Your company has a value of which cash is only one, usually small, part. Stuff you own, like buildings and patents and brands are another. So is debt your customers have with you. On this level, you can spend money without any effect on the value: If you buy a skyscraper in Manhattan, you may spend %2 billion in cash, but you get a $2 billion building in return. You can also increase the value ("make a profit") without actually getting any money: if you sell the skyscraper for $4 billion on December 20th, 2016, you've made a $2b profit in 2016, even though the money will only arrive in 2017. The reasoning is that this system results in a more accurate picture of a company's finances.