Why all losses are not included in accounting

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This discussion clarifies that accounting losses specifically refer to the actual loss of capital, such as through theft or natural disasters. It distinguishes this from opportunity costs, like the potential interest earned from invested cash or the delay in receiving payment for credit sales. While these might be perceived as losses in a general sense, they are not recorded in accounting records because the capital itself hasn't been diminished.

Derin Bulo

Derin Bulo (Querist)
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10 January 2023 why all losses are not included in accounting like when we keep cash in our hand we are losing an opportunity to invest it somewhere and earn interest from there etc

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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10 January 2023 You loose an opportunity to earn, it doesn't mean you loose your cash amount by any means.

Derin Bulo

Derin Bulo (Querist)
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10 January 2023 does it mean that loss is when we loss something we actually have .but sir in normal scenario is it a loss not in accounting terms.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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10 January 2023 Yes, loss is loss of capital amount.
Secondly, it is termed as operating capital, required in normal terms. Excess amount is deposited in bank and invested.

Derin Bulo

Derin Bulo (Querist)
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10 January 2023 sir one more doubt when goods are sold on credit say 90 days the seller is only getting money on or after 90 days is it a loss to him. but such types of losses are not covered in accounting. is it actually a loss in normal perspective but its not covered ion accounting

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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10 January 2023 As per accounting terms it is not loss, as said before.
But in actual practise, seller adds up interest of these credit days in its rate.
You may come to know in practical fields, that the rates of same goods are different if paid by cash and by credit of different days...

Derin Bulo

Derin Bulo (Querist)
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10 January 2023 is this same concept applied for the cash in hand sir. in normal case if we keep this with our hands we may perceive it as a loss but in accounting perspective it will be a loss only if we actually lose such money

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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10 January 2023 Yes, loss of any interest is not the actual loss...
It will be loss only if it is lost due to theft or by any natural calmities etc...

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