Use the P&L for Performance, Not Cash

The P&L question The P&L asks whether revenue exceeded expenses for a period. It is a performance report, not a bank reconciliation. Why cash differs Cash changes when customers pay old invoices, bills are paid late, debt principal is repaid, owners draw money, inventory is bought, or equipment is purchased. Some of those affect profit now; others live on the balance sheet. The bookkeeping risk If you force every cash movement through expenses, you make the P&L easier to explain today and less useful tomorrow.

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