Dori, you are rambling. We were talking about yearly net income and you somehow pretend that the money reserved for "next month's rent" has anything to do with yearly net income.
No, your right, net income has nothing to do with next months rent. Net income on a specific date is only a snapshot of a business' financial position at that moment in time.
Net income still doesn't mean squat in how a business works.
Obviously you still don't have a clue. Let's pretend you have a business and as of 12/31/2012 (the closing of your year end) your books showed that you had made a profit of $400,000, and there is a balance of $200,000 in your checking account, $200,000 sitting in your accounts receivables and $200,000 in your accounts payable. You also have a weekly payroll that averages $50,000 a week, and your rent of $50,000 is due on 1/1/2013.
So tell me smart guy, how rich is the owner of that company? Where is that so called profit of $400,000 that he has to claim on his personal income tax and pay taxes on? Is he personally $400,000 richer? Or is that $400,000 just part of the cash flow of daily business that keeps people employed?
And yes, I have read lots of accounting and tax books and taken several college courses on the subject.
