Basic Principles of Accounting

Net Profit is calculated by subtracting the business total expenses from revenue in the period between 1st July 2007 and 30th June, 2008. It is more complicated than just subtracting cash at the beginning from cash at the end of the period. This is because in accounting, we try to get a total picture at the given period in time so profits need to include goods sold on credit and other important activities like taxation. Basing everything on cash will be misleading and even go against accounting convention.