‘I just don’t understand it!’ Barry had received his accountant’s calculation of his business profit, showing an accrual profit for his first year in business of $45 290. ‘If I made so much money, why don’t I have it in the bank? My bank account shows only $15 040 on hand!’

Barry operates Barry Supply, which provides stationery and office supplies to business customers. He has no store, just a small rented warehouse, and only one employee. Here are the data that Barry and his accountant used. Explain clearly to Barry:

1 How the accountant calculated the $45 290 profit.

2 Why there is only $15 040 cash on hand.