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WHY IS PROFIT NOT ALWAYS CASH
Profit is the excess of turnover over cost and expenses. Profit is not cash always because a company can have its financial statements to be exhibiting large amount as profit whiles it has nothing in its pocket. Cash on the other hand, is called a reality by me. It is a language which a small boy or girl understands unlike profit. Profit most of the time come about through the application of accounting concepts and tools. Because of this, an account prepared in Ghana which uses the IFRS will be different from the profit figure computed in India which uses the India GAAP.
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What is the difference between cash accounting profit and loss and accrual accounting profit and loss?
Cash accounting and accrual accounting are two methods of accounting in cash accounting system all expenses and revenues are recorded when actual cash is paid or received while in accrual profit and loss statement, revenues and expenses are recorded when they are actually occurred and timing of receipt and payment of cash is not important.
Why Diffrance between cash flow and accounting profit?
Cash flow by definition looks at the flow of cash either inwards or outwards. However, financial statement accounting considers cash flows as well as non-cash items like depreciation, amortization of goodwill, capital write offs, bad debts, provisions, discounts & rebates, etc. The non-cash transactions affect the accounting profit while does not have any impact on the cash flow statements.Hope this helps!
What is the difference between profit making accounting and not for profit making accounting?
The difference between profit making accounting and not for profit making accounting is, that question should answer itself! 8^0
Why is revenue not cash in accrual accounting?
In accrual accounting not always all sales are made on cash basis that's why sales are shown when sales are made and not when actual cash received that;s why cash is not shown b'coz all cash is not received at the time of sales.
What is the difference between profit and loss account and cash flow statement?
Cashflow : Only the actual cash spent / received will be entered. Credit will not be entered. Profit & loss : It is more of accrual basis, all transactions that are happening in that accounting period will be entered. Cashflow : Only the actual cash spent / received will be entered. Credit will not be entered. Profit & loss : It is more of accrual basis, all transactions that are happening in that accounting period will be entered.
What is the difference between cash accounting profit and loss and accrual accounting profit and loss?
Cash accounting and accrual accounting are two methods of accounting in cash accounting system all expenses and revenues are recorded when actual cash is paid or received while in accrual profit and loss statement, revenues and expenses are recorded when they are actually occurred and timing of receipt and payment of cash is not important.
Is economic profit always less than accounting profit?
No economic profit is not always less than accounting profit; However, if accounting profit is less than economic profit the business would exit the industry.
Why profit is not equal to cash in accounting?
You could sell merchandise and make a profit. If the customer has not paid you yet, you have not increased cash. You have increased accounts receivable.
What managerial assessments may you make about an organization that has a profit and negative cash flow in the same accounting period?
What managerial assessments may you make about an organization that has a profit and negative cash flow in the same accounting period?
Why Diffrance between cash flow and accounting profit?
Cash flow by definition looks at the flow of cash either inwards or outwards. However, financial statement accounting considers cash flows as well as non-cash items like depreciation, amortization of goodwill, capital write offs, bad debts, provisions, discounts & rebates, etc. The non-cash transactions affect the accounting profit while does not have any impact on the cash flow statements.Hope this helps!
Does sales made on credit cause accounting profit and cash flow to differ?
Yes, because due to sales on credit sales are accounted for when they are occurred while cash is received in some future time that;s why accounting profit and cash flows differ due to recognition timing difference.
What managerial assessments can you make about a company that has a profit and a negative cash flow in the same accounting period?
There are many managerial assessments you could make about a company that has a profit and a negative cash flow in the same accounting period. You could say that there is an error or that temperature changed dramatically for example.
HOw can a business lose money for many years and still have plenty of cash?
Cash flow is different from profit. A business can have lots of profit, but low cash flow. This is due to the Accruals basis in accounting. A customer could pay on credit, it's recorded as profit on the moment of transaction but the organisation physically does not have the cash yet.
Are the proceeds from the sale of a building included in net income?
No proceeds from sale of building is part of cash flow statement while profit or loss on sales of building is part of net income in accrual base accounting while cash base accounting it is part of net income or loss.
What is the difference between profit making accounting and not for profit making accounting?
The difference between profit making accounting and not for profit making accounting is, that question should answer itself! 8^0
Land was bought for 20000 then sold for 65000 in cash how does this affect the accounting equation?
It will increase the profit with 45000 while increase in cash of 65000 while reduce in land of 20000.
Why is revenue not cash in accrual accounting?
In accrual accounting not always all sales are made on cash basis that's why sales are shown when sales are made and not when actual cash received that;s why cash is not shown b'coz all cash is not received at the time of sales.
