“THE ACCOUNTING PROFIT FIGURE IS SIMPLY A MEASURE OF THE TRUE PROFIT OF AN ORGANIZATION.” DISCUSS.

In order to assess whether the accounting profit is a measure of the true profit it must first be shown that there is such a thing as true profit. If we decide there is, we then need to know what it is exactly, in order to assess the extent to which the accounting profit reflects this true profit figure. Before studying this module, I believed that the true profit was essentially the accounting profit calculated correctly. I saw profit as being a simple calculation that would always return the same figure.

 As I didn’t realize the extent to which professional judgement is involved in reaching the profit figure I couldn’t identify the real issues surrounding the idea of the true profit. Instead I pointed out flaws in the concept of profit itself, for example that profit doesn’t consider cash flow. However as these flaws apply to true profit as much as accounting profit (they apply to the notion of profit itself), they’re not really relevant to the question.

I first learned that accounting profit and true profit