Comments for Revenue vs. Deposit

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Jun 07, 2010
Profit is not cashflow
by: Bookkeeping Essentials

Hi Jackie,

Engineers are usually very good with numbers so you need to explain that when you do accrual based accounting cashflow is not the same thing as profit. There will always be differences because the income statement includes:

** non-cash entries like amortization of capital assets;

** sales from accounts receivable (the cash has not been received yet);

** expenses from accounts payable (the cash has not been paid out yet);

** loan proceeds and owner contributions never hit the income statement (the cash received is recorded on the balance sheet); and

** adjusting entries to match expenses with revenues (such as prepaid expenses or customer prepayments) ....

... just to name a few differences.

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