I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART C: THE USE OF DOUBLE-ENTRY AND ACCOUNTING SYSTEMS 

 

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3.3 Profit introduced into the accounting equation 

On 3 July Liza has a very successful day. She sells all of her flowers and plants for $900 cash. 

Since Liza has sold goods costing $650 to earn revenue of $900, we can say that she has earned a 

profit of $250 on the day's trading. 

Profits belong to the owners of a business. In this case, the $250 belongs to Liza Doolittle. However, so 

long as the business retains the profits and does not pay anything out to its owners, the retained profits 

are accounted for as an addition to the proprietor's capital.