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Just because I have made a profit of (say) $1,000, it does not mean that I have an extra $1,000 in the bank.
There are lots of reasons.
For example, many of my customers might still be owing me money. They will have recorded as sales (so more profit), but the cash will not have increased.
The profit is after charging depreciation, but depreciation does not involve spending cash.
Money may have been spent buying non-current assets – that means less money in the bank but does not affect the profit.I do suggest that you watch my lectures. They are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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