On 5/30/2017 4:38 PM, Martijn Heuts wrote:
Hello,
I am trying to understand the reporting part and trying to figure out my net profit.
First I pull up my monthly "Cash Flow" report which shows all incoming money
into my bank account andit shows all expenses taking out of my bank account (assets).
Then there is the Income and Expenses report. This report shows "Income" which doesn't
add up to the actual income, so I assume it's "Charges" instead, right?
Stop right there.
I think you are confusing what a "cash flow" report is supposed to show
(flow of cash) and what an "income statement" (aka P&L) is supposed to show.
Your example indicates the confusion.
a) You paid an expense by assuming a liability.
That would show in P&L but NOT in cash flow
b) You late paid off this liability
That would show in cash flow but NOT in P&L
BOTH of these reports can be important for a business for different
reasons. Business can be fine in terms of P&L (it's making a profit)
but might not have cash on hand when needed. Or a business might be fine
in terms of cash flow but facing long term troubles because losing money.
To see your net profit, use the "Income Statement" (aka: Profit and Loss
aka Statement of Revenues and Expenses)
Michael D Novack
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