Final answer:
Doug's upfront payment for business consulting fees would appear on the cash flow statement, and as the service is used, adjustments would be made to the income statement and balance sheet. Relatedly, a firm's accounting profit is its total revenues minus explicit costs, such as labor, capital, and materials.
Step-by-step explanation:
Doug's $6,000 payment for one year of business consulting fees up front would be recorded in the financial statements, specifically, on the cash flow statement initially, because it reflects the cash transaction. Over time, as the services are rendered, the expense will be recognized monthly on the income statement, and the prepaid amount will be adjusted on the balance sheet under current assets as prepaid expenses decrease.
To illustrate a related concept, let's consider a firm's financial performance. If a firm had sales revenue of $1 million last year and incurred explicit costs for labor, capital, and materials amounting to a total of $950,000, the firm's accounting profit would be calculated as the total revenues ($1,000,000) minus these explicit costs. Therefore, the firm's accounting profit would be $50,000.