A profit and loss (P&L) report is usually calculated from all your receivable and payable invoices regardless of whether the invoices have been paid or not.
A cash based P&L report however is calculated from your incoming invoice payments and outgoing purchase payments and then stratified by nominal code, depending on how those invoices were categorised. The report will look much the same as a standard P&L, but the underlying calculations may be different.
A cash based P&L is typically used by smaller businesses that want to get a better view of their cash position. Such businesses may also be eligible to report their earnings and calculate their tax liability with HMRC on a cash basis rather than accrual.
The cash based P&L report takes a little bit more time to generate than the standard accrual based P&L report. This is because we need to pull information from a few different sources. Here’s how we make the calculations:
The report is compiled and delivered as a snapshot. You will need to refresh the report should any underlying information change within the reporting period.
The report is categorised by nominal code and as with the standard P&L it will show broaded totals for the turnover, cost of sales and expenses to arrive at a net profit amount.
You can drill down on the nominal totals to see a list of payments that make up those totals. You can further drill down on the payment allocations to see the invoice(s) to which the payment is assigned and the nominal entry breakdown.