[derrick050709]

Good Day.

How do I say if a company has made profit for a month .

Products is bought to make new products that is sold on account to debtors

My question is : say for the month of July : do I use sales to debtors even though they will only pay in August or do I use the debtors that have paid in July for previous accounts , and do I add stock (produced products and consignment stock ) and what creditors do I use the creditors paid in July on the creditors that delivered in July , in other words the onces only beiing paid in August.

[paraclete]

The first thing you have to resolve is ; is your accounting on a cash basis or on an accrual basis?

In an accrual based system you account for the income at the point of sale, that is when invoiced. In the same way you match inventory sold to calculate cost of sales.

In a cash based system you will calculated profit based on cash flows and this produces a distorted view, which is why the accrual based system is preferred.

From your description you have a manufacturing process which requires more complex calculations and the calculation of product cost and management of inventory.

A good rule of thumb is if you bank balance increases over time you are making a profit