Online Exclusive: Accounting Basics for Small Contractors — Statement of Cashflows

How come the net profit on my income statement is so much more than the money I have in the bank? Where did it go? Profits do not equal cash! You don’t pay your bills with profits. You pay your bills with cash. It’s possible for a company to be profitable and yet be cash-starved. Cash will come into and go out of the company through operating, investing and financing activities.

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