Why Doesn’t My Profit & Loss Statement Match My Bank Account?

In this episode of The Business BFF podcast, host Emma Bowdler (founder of The Women’s Accountant) explains why your profit and loss statement might not match your bank account. We explore common reasons for this discrepancy, including accrual accounting, the exclusion of GST and loan repayments, the impact of drawings and dividends, and the treatment of asset purchases. Emma breaks down these concepts in an easy-to-understand way, helping you gain a clearer picture of your business's financial health.  Key Takeaways: Accrual Accounting: Income and expenses are recorded when invoiced or incurred, not when money is received or paid. GST and Tax Exclusions: GST and income tax are not reflected on the profit and loss statement. Loan Repayments: Only the interest portion of loan repayments is included as an expense on the P&L. Drawings and Dividends: Withdrawals by business owners do not directly impact the profit and loss. Asset Purchases: The full cost of assets is not expensed immediately but depreciated over time. Timings: 00:00 Introduction 01:21 Accrual Accounting 03:45 GST and Tax Exclusions 05:02 Loan Repayments 06:36 Drawings and Dividends 08:08 Asset Purchases 09:53 Conclusion