I recently opened a new shop and i contract my services to a local hospital. im paid a monthly fee for my services. i just received my financial statements from my accountant. my statement shows a cash balance of $3600 at the end of the month, but a net income of only 500. is this possible or should i hire a new accountant?

If your start up cost were subtracted from the cash balance it might explain the math. There are also other expenses that might reduce the net income. Perhaps there are other debts outstanding that would require the use of the cash to pay them off.

Simply having the cash does not mean that was all profit.

Not to mention the fact that there's a difference between cash and accrual accounting. Cash accounting is exactly what you think it is: when you receive cash for services, it's income. And when you pay for something, it's an expense. Although, even so, what oneguyinohio said would still be true. Like fixed assets are still counted as fixed (i.e. your computer, which you spend cash on, but it's not an expense to be deducted). I can't even imagine cash equalling net income, even on a cash basis.

But, there's also the accrued method of doing accounting. That is when revenues are counted when they are earned, and not necessarily when paid. And expenses are recorded when they happen, and not necessarily when paid. An example I use to explain this to my students is lawn mowing. If I come to your house and mow your lawn, I have performed a service for you. I therefore have earned. And you therefore have an expense. But what if you don't pay me until next month? I still earned and you still had an expense, because the service was actually performed. Earning isn't money, it's actually doing something. Money is what you would give to me of value in exchange for it, but is not the same thing. So on an accrued basis, the earnings and expenses can mis-match cash quite frequently.

So cash and net income not matching means nothing. It's normal. So it doesn't say anything at all about your accountant one way or the other. A lot of times small businesses like yours are done on a cash basis. If you're interested to know, you can ask your accountant what method is being used.