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Why Is it that when we partially pay a payable the profit does not change and instead the cash position decreases, but when we pay electricity the profit goes down? Are they not the same? Both an expense in running the business? or is it something to do with direct and indirect costs? Thanks in advance
The expense against the profit is the expense for the period in question regardless of whether or not it was paid during the period (or whether it was still owing at the end of the period and therefore paid in the next period).
If we use $100 worth of electricity this month, then it is an expense in this month even if it is not paid for until next month.
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