A profit and loss (P&L) report is usually calculated from all your receivable and payable invoices regardless of whether the invoices have been paid or not.
A cash-based P&L report, however, is calculated from your incoming invoice payments and outgoing purchase payments and then stratified by nominal code, depending on how those invoices were categorised. The report will look much the same as a standard P&L, but the underlying calculations may be different.
Prefer to watch?
Prefer a video walkthrough? Watch our How to Generate a Cash Based Profit & Loss Report tutorial on the QuickFile Help Guides YouTube channel.
Before you start
- The cash-based P&L is available for sole traders and non-incorporated partnership accounts that have a Power User Subscription or are linked to an Affinity account.
- It isn’t available for limited companies, which have to report on an accruals basis.
- If you use the Flat Rate VAT Scheme, check that it’s switched on in your VAT settings (see Flat rate VAT adjustment below).
When to use a cash-based P&L
A cash-based P&L is typically used by smaller businesses that want to get a better view of their cash position. Such businesses may also be eligible to report their earnings and calculate their tax liability with HMRC on a cash basis rather than accrual.
How do I run the report?
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Go to Reports > Show all reports and select the Other tab.
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Click Cash Based Profit and Loss Report.
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Enter the start of the period in From and the end in To (dd/mm/yyyy).
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Click update. The report shows GENERATING while it’s calculated, which takes a few seconds.
Tip: You can also switch to the cash report from the standard P&L: go to Reports > Profit and loss and click Cash Basis at the top right. Click Invoice Basis to go back to the standard (accruals) P&L.
Use Export Data or Print Report above the date range to keep a copy of the report.
How are the calculations made?
The cash-based P&L report takes a little bit more time to generate than the standard accrual-based P&L report. This is because we need to pull information from a few different sources. Here’s how we make the calculations:
- First, we retrieve all your sales and purchase payments over the reporting period.
- We then analyse what invoices these payments were attached to.
- The itemised lines on each invoice are further analysed to determine the nominal codes to which any itemised amounts were assigned.
- Once the invoice allocations are determined, an additional check is made to find any direct-to-bank taggings, i.e. where amounts are tagged from a bank entry directly to a nominal code.
The report is compiled and delivered as a snapshot. When you open the report again, it shows the last snapshot, not your latest records. If anything changes within the reporting period (for example, a new payment or a bank tagging), click update to generate the report again, or click Click here to refresh in the snapshot message at the top of the report.
Drilling down on the data
The report is categorised by nominal code and, as with the standard P&L, it will show broader totals for the turnover, cost of sales and expenses to arrive at a net profit amount.
You can drill down on the nominal totals to see a list of payments that make up those totals, and then on each payment to see the invoice(s) it’s allocated to and the nominal entry breakdown:
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Click the magnifying glass next to a nominal total. Payment Allocations lists the payments that make up the total, with the payment date, client or supplier name and amount.
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Click a payment amount.
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Payment Breakdown shows the invoice the payment is allocated to, the nominal code and the net amount. Click View payment slip to open the payment, or Back to return to the list.
Flat rate VAT adjustment
If you are VAT-registered and use the Flat Rate Scheme, your sales are typically recorded at the standard rate of VAT. An adjustment is therefore needed to reflect your allocated flat rate VAT percentage and provide a more accurate sales figure.
The report adds the adjustment when the Flat Rate Scheme is switched on in your VAT settings (Account Settings > Company settings > Click here for more VAT Settings: Flat Rate Scheme set to On, with your percentage in Flat Rate to Apply).
The adjustment appears under Turnover as Flat Rate VAT adjustment (code FRV). The line shows your flat rate and the cash turnover it’s based on, and the amount is added to Total Turnover. In the example below, £12,000 of cash receipts at 12% gives an adjustment of £560.00.
How is the adjustment calculated?
To calculate this adjustment, we take your total gross cash receipts for the period (including VAT). The VAT included in those receipts at the standard rate (currently 20%) is found by dividing the gross total by 6. Your flat rate VAT is then calculated by applying your allocated flat rate percentage (e.g. 12%) to the same gross total. The VAT adjustment is the VAT collected at the standard rate less the flat rate VAT. This difference is the VAT you have retained under the scheme, and it is added back as an adjustment, increasing your reported income total.
Example: With gross cash receipts of £12,000 and a flat rate of 12%:
- VAT collected at 20%: £12,000 ÷ 6 = £2,000
- Flat Rate VAT: £12,000 × 12% = £1,440
- VAT adjustment: £2,000 − £1,440 = £560
The flat rate adjustment assumes all cash receipts are subject to VAT at the standard rate of 20%.
How do I remove the adjustment?
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Click Remove on the Flat Rate VAT adjustment line.
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Click OK to confirm.
Important: Removing the adjustment only changes the report you’re looking at. If you click update to generate the report again, the adjustment is added back.
You can also remove the adjustment from your MTD cumulative update by selecting it in the sales income detail breakdown.
Other things to note
- For VAT registered users, amounts are calculated net of VAT as VAT is a balance sheet item.
- Payments on account (prepayments) reside on the balance sheet and will not appear in the profit and loss report.
- Journals are included when a matching contra entry to a bank account is identified. Journals between two nominal codes that aren’t bank accounts are left out.
- Each report is a point-in-time snapshot. Any change to the underlying accounting records in that period will require the report to be refreshed.
Troubleshooting
The figures are different from my standard Profit and Loss report
That’s expected. The standard P&L uses invoice dates (accruals), so it includes unpaid invoices. The cash-based P&L only includes payments made and received in the period.
I can’t find the Cash Based Profit and Loss Report
Check Reports > Show all reports > Other. The report is only available for sole trader and partnership accounts with a Power User Subscription or linked to Affinity; limited companies don’t have it.
A recent payment isn’t in the report
The report is a snapshot. Click update to generate it again with your latest records.
The flat rate adjustment came back after I removed it
Generating the report again with update recalculates it, including the adjustment. Remove it again if you don’t need it.
Related topics
To use this report you need a Power User Subscription or an Affinity link. These articles cover that and the reports and updates that sit alongside it.
- Power User Subscription: What the Power User Subscription includes and how to upgrade.
- QuickFile Affinity overview: How linking to an accountant’s Affinity account works.
- Cumulative Updates: Prepare and submit your MTD for Income Tax cumulative updates.
- Statement of Cash Flows Report: See how cash moved in and out of the business over a period.
- Balance Sheet Report: Check your assets, liabilities and balances, including VAT and payments on account.
- Cash-based P&L (community discussion): A staff answer on finding the report and why it isn’t available for limited companies.