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What Does Profit Accountability Mean?

What Does Profit Accountability Mean? thumbnail
Accounting terminology is defined by GAAP

Generally accepted accounting principles (GAAP) are a set of rules for accountancy maintained by the Federal Accounting Standards Advisory Board. These rules are used to designate profit and loss. Profit accountability is formally defined as "account profit" and designates a company's total earnings consisting of four elements: overhead, appreciation, interest and taxes.

  1. Overhead

    • Overhead is the cost of doing business. Overhead includes necessary administrative expenses not attributed to a specific activity in the business or specific line item in the budget. Rent or mortgage payments, insurance, office supplies and utilities are usually included in overhead.

    Depreciation

    • Depreciation is a noncash expense that reduces in value over time. For instance, if a company owns a car, the annual depreciation rate of the vehicle is considered in calculating the account profit.

    Interest

    • Interest is the fee charge by a borrower to a lender. If a company has loans with its bank, these rates may fluctuate and are included in calculating account profit.

    Taxes

    • All federal, state and local taxes imposed on the business are included in calculating the account profit of the company on an annual basis.

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