PROPRIETARY THEORY Definition

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PROPRIETARY THEORY is where no fundamental distinction is drawn between a legal entity and its owners, i.e. the entity does not exist separately from the owners for accounting purposes. The primary focus is to report information useful to the owners, and therefore the financial statements are prepared from their perspective. See ENTITY THEORY.

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GROSS SURPLUS RATIO measures the margin on each dollar of operating revenue for the entity in question. The operating results before interest and depreciation, or gross surplus, are calculated as a percentage of total operating revenue. The gross surplus ratio shows the gross surplus as a percentage of the entitys turnover. If the percentage is high this could be interpreted as a sign that the entity is operating efficiently.

CARTAGE/CARRIAGE OUTWARDS Occurs when a business pays for sold goods to be delivered to its customers premises.

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