Cash profit

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Ravindra Mahale

Ravindra Mahale (Querist)
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10 October 2013 how cash profit is calculated ?

Sanket

Sanket (Expert)
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10 October 2013 Do u know about accural basis and
monetary basis. accural basis means
every transaction which are done 1
financial year are entered and cash
basis means every sales which are form
in cash are enter. book profit means
profit which are earned in 1 financial
yera (accural basis) and cash profit
means profit earned on the basis of
cash basis. book profit are shown in the
profit and loss a\c for the purpose of
income tax and cash pofit are for
bussiness men with help of this they
known about what the standard of cash
inflow and outflow.

Sanket

Sanket (Expert)
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10 October 2013 To calculate cash profit, the company
must be utilizing cash accounting instead
of accrual accounting. Cash accounting
records transactions as the cash
exchanges hands. This means sales sold
on credit will not be a factor in cash
profits. The simplest way to calculate
cash profits is to compare cash in-flows
to cash out-flows. As the company
collects money from sales on credit, the
cash profits will increase. If the company
has sales on credit, then accrual
accounting will usually indicate higher
profits.