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Where is my cash profit? (5 min read)



One of the most commonly asked questions is where did my profit go? Cash in the bank rarely = profit


It can be very confusing if your business has no cash in the bank and your accountant tells you that you made a profit.


Cash coming in to the business can take many forms, for example, sales, proceeds of sale of assets and monies loaned into the business - these are not all recorded as income of the business. The same principle applies for cash coming out of the business for example, drawings, loan repayments, purchases of equipment.


There are other factors to consider such as timing as you must report your income and expenses on an accrual basis. Broadly what this means is that any sales you have made that you have not actually received in cash are added to your profit in the same way that any purchases you have made that you have not actually paid in cash are deducted from your profit.


See the table below for an easy reference of key items affecting the difference between your cash in the bank and accounting profit.


If you would like help understanding this better book a call here - https://calendly.com/twosides_natalie/15min-other

Natalie Lennon

Founder & Director

Two Sides Accounting

02 9030 0269

www.twosides.com.au

@twosidesHQ

natalie@twosides.com.au

https://twitter.com/nat_lennon

https://au.linkedin.com/in/natalielennon

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