Comment on Dr. Hendley’s statement that the difference between the opening bank balance ($30,000) and the January statement balance ($75,000) is pure profit.
Dr. Hendley's statement that the difference between the opening bank balance of $30,000 and the January statement balance of $75,000 is pure profit is incorrect. The difference between these two amounts does not necessarily represent profit, as there are other factors to consider.
To understand this, we need to analyze the concept of profit. Profit is typically defined as the excess of revenue over expenses during a specific period. It represents the financial gain that a business or an individual achieves after deducting all the costs incurred in generating that revenue.
In the case mentioned, the difference between the opening bank balance and the January statement balance may include various components such as revenues, expenses, gains, and losses. It is not safe to assume that this difference is solely a result of profit.
To accurately determine the profit, you would need to consider other financial information like sales, cost of goods sold, operating expenses, interest expenses, taxes, and any other relevant revenue and expense items incurred during that specific period.
Therefore, it is advised to review the complete financial statements, including the income statement, to calculate the actual profit or loss earned during the given period. The income statement would provide a clear picture of the revenue, expenses, and the resulting profit or loss, giving a more accurate assessment of the financial performance.