Cash vs Profit Problems :( :(

[hello_kitty]

I'm having some trouble on understanding the questions relating to cash vs profit and how to answe them. for example if a businss has a net loss but an increase in cash..
I'm not sure of the effects of the examples on the qeustions

For Example:
A firm may have a Net Profit but suffer a decrease in cash
- GST Settlement (how doe sthis answe the question and what is the effect on it?)
- GST Paid is greater than GST Recevied
- Expense paid is greater than Expense incurred
- Cost of Sales is less than payment to creditors
- credit sales is greater than receipts from debotrs
- STock Gain because its a revenue item that increases profit, but has not effect on cash (but wouldnt it need to decrease cash to asnwer the question)??

What about cash drawings, loan repayments and Cash payments for non current assets??

A firm may suffer a Net Loss but genreate an icnrease in cash

- Depreciation because its an expense that decreases profit, howveer has no effect on the Cash (Again doenst it need to increase cash?) Same reason for Stock Loss and Bad Debts
- GST Received is greater than GST PAid (Why what is the effect on the question?)
- Receitp frrom debtors is greatr than credit sales?? (effect?)
- Expense inucrred is greater than Expense paid? (effect?)
- Cost of Sales is greater than Payment to creditors (effect)?

What baout capital contributions and loan received??

Will these be the only types of questions???
so nervous for my sac

any help would be great! thanks

[sam.utute]

Summary of Cash v Profit examples:

1. C (up) v  P (-)
2. C (dn) v  P (-)

3. C  (-) v  P (up)
4. C  (-) v  P (dn)

What I have written above are some of the possible scenarios that you can use to answer these types of questions.
E.g.
To answer the following: Cash surplus, but a net loss during the same period.
You would use options 1 and 4: You are looking for items that increase cash and have no effect on profit, or items that decrease profit but have no effect on cash.

There are other possible exams:

1. C  (up large) v  P (up small)
2. C  (up small) v  P (up large)

3. C  (dn large) v  P (dn small)
4. C  (dn small) v  P (dn large)

So if we are looking at the same example, (cash surplus, net loss), we would want items that fit options 1 and 4.
An example: Receipts from debtors was greater than Credit sales, resulting in a significant increase in cash, and a minor reduction in net loss. This can occur as a result of credit sales that earned in the previous reporting period and are being settled in the current period.

[hello_kitty]

ah i sort of get it...but with like the examples i gave above, i get confused as to why they belong to the question??
i'm still a bit confused on why 1 and 4 is used?
so you would always find 2 out of the 4??
or would you say that with a question 'Cash deficit and net profit' you would look at cash going down and no effect on profit, and items that increase profit and have no effect on cash? but if im not wrong are there items that affect both cash and profit??

[sam.utute]

or would you say that with a question 'Cash deficit and net profit' you would look at cash going down and no effect on profit, and items that increase profit and have no effect on cash?

That's correct.
At the same time, you need to look at items that will increase both Cash and Profit, and items that will decrease both Cash and Profit (to differing degrees, depending on your scenario. In your example, you need to look at items from:

C (dn) v  P (-)
C  (-) v  P (up)

C  (up small) v  P (up large)
C  (dn large) v  P (dn small)

[hello_kitty]

So what would you say is a good response as to why Expense Paid is greater than Expense incurred
in a question like:

What could cause a business to have a decrease in Net Cash Outflows from operations but have a Net Profit?

Because for somethin glike GST Paid is greater than GST received it is because GST is a liability

THanks