Why is my profit different from my bank balance?

Profit measures income minus costs and expenses under the selected accounting method. A bank balance measures money in one account at a point in time. They should not be expected to be the same.

Common reasons for the difference

Event	Why cash and profit differ
You invoice $1,000 and the customer has not paid.	Accrual income can be recognized before cash arrives, subject to the sale’s earning conditions.
The business receives a $5,000 loan.	Cash increases alongside a liability; borrowed principal is not sales income.
An owner contributes $2,000.	Cash increases without a new customer sale.
You move $500 from checking to savings.	One bank account falls while another rises; the transfer itself is not an expense.
You pay a credit card balance.	Purchases may already be recorded; paying the liability is not another purchase.
You buy inventory or equipment.	The payment and recognition of cost may occur at different times.

A customer deposit can also arrive before the sale is earned. See customer deposits rather than treating every incoming bank row as income.

Compare the right reports

1. Open Reports → Profit and Loss and check the period and Accounting method.
2. Review Balance Sheet at the end of that period for cash, receivables, liabilities, and equity.
3. Use Statement of Cash Flows to investigate sources and uses of cash.
4. Follow linked balances to the underlying transactions and check large or unexpected movements.

Do not compare one month’s profit with the lifetime balance of a bank account and assume the difference is missing income.

When to investigate an error

A real error may be duplicate sales from bank categorization, an owner contribution coded as revenue, missing fees, or an incorrect payment date. Correct the original classification or transaction link; do not add an entry just to make cash equal profit.

Related: Cash vs. accrual and read your financial statements.