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.
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.
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