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am i making money?

Hi guys

I am runing a truck business, i need help interpreting my P&L

I run reports for my 1st quarter
in my P&L i am showing a net income of $30K for the 1st quarter, but I am also paying $60 per quarter against truck loans, that means every month i am paying 420 for trucks that i am leasing to own, i know my assets are increasing with each payment, but also
if i have a net income of $30k in the 1st quarter and if i paid $60 in the 1st quarter that are actually increasing my assets
does this mean that i took $30 extra from my saving to cover/increase my assets(I know i tricky)
in other words even i made a net profit of $30k, for me to be able to increase my major assets i had to take $30 from my savings + $30 net profit to increase my assets in $60K

my question, am i making money?????
or maybe an misinterpreting this.

please help

thanks
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titorober23
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titorober23
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4 Solutions
 
titorober23Author Commented:
maybe i didn't explain it correctly

 

I rundelivery business, i owe some trucks others and financing(still paying)

in my p&L i am showing $30k net income(understood)

but i am also paying $60k to the finance company for some trucks. when i do this payment my assets grows in $60k; but my question

to cover this payment i am using $30k net income and $30 from my savings to cover this $60k.

am i making money or not?
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John HurstBusiness Consultant (Owner)Commented:
Do you have an expense (profit and loss) account inside your P&L statement for recording truck payments?

In other words, does your $30K first quarter income include $60K in payments?

If you are writing a cheque to your asset account, then you are not doing it correctly. If this is the case, it would not be clear here whether you are making money.

You need an accountant anyway (because you are running a business) and it will be worth your while to have your accountant set up the proper entries for your truck and other financing to flow through your P&L.

... Thinkpads_User
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titorober23Author Commented:
the check that i am wrinting is not n expense, because this is  a special deal as to own, any payment goes to the value of the trucks, so is debiting my assets.
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John HurstBusiness Consultant (Owner)Commented:
You can pay back capital to any asset without it going through expense, but any interest costs must be expensed.

So then where did the cash come from to acquire the trucks that you are now paying back through capital?

(a) If the company had the cash, then you would not need to pay it back, but amortization creates a non-cash expense that helps build up replacement cash.

(b) If the company borrowed the money, then (i) you should be paying interest (expense) and (ii) you should be earning enough profit (which turns to cash) to pay down the borrowed money.

Because of the payment stream in your first post, and the need to take from savings, I think probably you are not making money, or at the very least, not enough to pay down the borrowed money.

... Thinkpads_User
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John HurstBusiness Consultant (Owner)Commented:
Another thing to consider is the a Profit and Loss statment is not a Cash Flow statement. If the company is making money on paper, but cash flow is negative, then you are too close to the line. You need to be profitable enough to create cash so that you can absorb captial acquisitions and debt repayments. ... Thinkpads_User
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John HurstBusiness Consultant (Owner)Commented:
titorober23 - Any followup?

Based on your question and responses, you are not making money.

A business that makes an overall profit after all expenses and debt service payments generates cash. You are having to borrow from savings, so you are not making enough money. ... Thinkapds_User
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John HurstBusiness Consultant (Owner)Commented:
Thank you, and good luck with your business accounting. ... Thinkpads_User
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