profit and loss statements

Cat31

Hi

My husband is a sole trader. What profits and loss statement should i look at?

Have printed both off, profit and loss and the profits and loss in small business entity.

There is a big difference in totals.

From memory my accountant told me to use the small business entity P&L, but why such a

huge difference in totals.

Can anyone help me understand this

 

 

Tracey_H

Hi @Cat31 

 

Thanks for your post. The Profit and Loss Statement is the accrual based report while the Profit and Loss (cash) in Small Business Entity is the cash based report.

 

The accrual accounting method reports income and expenses based on the invoice date. For example, you create a sales invoice on the 30th March and the customer pays on the 2nd April. That invoice is reported as income in the March Profit and Loss Statement and in the Jan-Mar BAS because the invoice date is March.

 

The cash accounting method reports income and expenses based on when payment is received and paid. Using the above example, that invoice is reported as income in the April Profit and Loss (cash) and in the Apr-Jun BAS because payment was received in April.

 

So the reason that you will see a big difference in the totals for those two reports is that the P&L Statement reports every sales and purchase invoice recorded within the filtered date range. While the P&L (cash) only reports the sales invoices that have been paid and the purchase invoices that you have paid within the filtered date range.

 

I hope that clarifies it for you. Please do let me know if you need further help.

 

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