Check out some similar questions!

pradeep gupta · Oct 15, 2009, 02:06 AM

Can somebody explain the following?

I know the net worth will increase by the profit on the liablity side of the balance sheet. But where does the proft sits on the asset side of the balance sheet?

ROLCAM · Oct 15, 2009, 02:43 AM

It sits under the auspices of NET ASSETS.
You must appreciate fully what NET ASSETS are.

morgaine300 · Oct 16, 2009, 08:10 PM

Considering that far too many people think that revenues and cash are the same thing, I would like to clarify that PROFITS don't go on the asset side at all.

Assets are what you get of value in exchange for earning revenue, but they are not the revenues themselves. If you are paid cash, cash isn't revenue or profits. Revenue is what you earn -- that is, the service you perform or the goods you deliver. Then you get an asset (like cash or receivable) in exchange for that.

When you record the revenue, you also record an asset. But the asset isn't the same as the revenue -- they are two different things, and those two things balance with each other.

(BTW, it's not the "liability side." Liabilities are included on the right, but so is equity. And revenue (less expenses) go into the equity part, not the liability part.)