Profit may be defined as follows:
1. Generally speaking the profit of the business during a given period is the excess over the expenditure for the period.
2. It is the excess of Assets over the liabilities and the capital between the two periods.
Profit is the different to the net assets of the business an existing on the end of the year and on the commencement of the year after making necessary adjustments for internal or introduction of capital. The surplus of income earned during a particular period after providing for all actual and outstanding expenses, incurred in the earning of such income is the measures of profit.
Divisible Profit is that part of the net profit of the business which has actually been released and bonafide exists after the revaluation of all assets and liabilities and can legally be distributed to the share holders as dividend. The amount of divisible profit is ascertained in accordance with the provisions of the memorandum of Association and the articles of Association. Distribution of profits which would affect the interest of third parties of which would amount to the return of capital to the share holders, would be illegal. In all cases capital of the business is to be maintained intact.