You see a $38,000 cash profit in your profit and loss account (P&L), but your bank account doesn’t reflect this. Here’s a simple breakdown of why this happens and what you can do about it. Understanding these areas can help you manage your finances better, make informed tax decisions, and ultimately create more wealth.
Drawings
What are they? Drawings are amounts taken out of the business by the owners for personal use. This reduces the cash available from the profit.
Impact:
What to do:
And talk to us.
Disallowance
What is it? Some business expenses, like a home office power bill or personal use of a company vehicle, are partially disallowed for tax purposes.
Impact:
What to do:
And talk to us.
Purchasing an Asset
What is it? When you buy assets like equipment or vehicles through financing options (chattel mortgage or hire purchase), the principal repayment is not tax-deductible.
Impact:
What to do:
And talk to us.
Paying Down Old Debt
What is it? Repaying old debts, such as overdue taxes or superannuation, from your profit.
Impact:
What to do:
And talk to us.
Final Thoughts
Taking the time to understand where your profit goes helps you better manage your finances and create more opportunities for wealth.
Clear understanding and proactive planning ensure your business stays financially healthy and prepared for the future. If you have any questions or need detailed explanations, don’t hesitate to reach out to us.
