Expert: Ed McFarland - 5/26/2005

Question
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Followup To
Question -
This may seem like a stupid question - but I can't figure out where my money is!  I own a small business and use Peachtree Accounting software.  When I run my financial statements, I show a net profit of (as an example) $100,000 - but I only have $30,000 in the bank and $25,000 in receivables - so where is the rest of the money?  I know you can't give me an exact answer, but what could be some possibilities?  Where could the extra money be going that would prevent it from showing up on this report? I'm at a loss.  Every time I show my husband the report he asks me where all that money is - I don't have an answer.  
Answer -
You are confusing profit for money in the bank. They are not the same thing.

Keeping it simple,you have 200k in sales, you put through 100k in expenses. Your 100k profit.

30k is in the bank, 25k is money owed you, we are looking for 45k now. Look at the balance sheet and find the inventory, prepaid expenses and you will probably get to the missing 45k.

Good luck

I appreciate it, but I don't have inventory or prepaid expenses.  Could it be that some of this year's profit is going to pay last year's invoices?  That's the only other thing I can think of. The bummer is that I have to pay taxes on this amount, and I don't have the money nor do I have the money to pay the taxes on it by the end of the year!

Answer
I doubt it. It is more likely the way you are accounting for things and putting them into your system.

You need to seek out a bookkeeper or accountant to help set it up right and to avoid a big tax bill, about 30k from what you are telling me. Their help would cost you less.

You may also want to find the local SCORE chapter and somebody there would take a look at your income statement and balance sheet.

Another thing you can look at is the statement of cash flows and look at your sources and uses and see if that makes sense.

It could be you should use an accural method and you are using a cash method of accounting.

Good luck