Profit and Cash
From “An Introduction to the Cash Flow Statement¨ in Accounting and Finance for Managers
Clearly, some profit can take the form of cash, especially if it is realized profit. So, the two are not mutually exclusive and in fact overlap. Any profit that is actually and presently relevant for budgeting and expenditure is profit that’s already been realized as cash (see Shareholder Equity as a Company’s Fixed Liability).
In other cases, for example for financial statements or accounting, it makes more sense to place a hard line between cash and profit, so that “cash¨ is mutually exclusive with “profit,¨ even if the former is a realization of past accruals of the latter. This is because accounting statements are financial summaries of different moments in time, rather than a recording of the movement or motion of cash (i.e., the cash flow) as such (again, see Shareholder Equity as a Company’s Fixed Liability but also 20241031152439-Components_of_a_Profit_and_Loss_Account).
Accounting and the nature of commercial time
One way, under such a situation, of treating profit v. cash, then, is to treat “profit¨ as the actuality of a difference between the expected finalizing of transactions or monetary obligations on the part of others, and the finalizing of transactions or the planned fulfillment of monetary obligations on the part of oneself to others, in present commercial activity. Profit is the future difference of present activity, extant via that present activity. Cash, on the other hand, is the past difference extant in present activity as a potential for commercial activity. What, then, actually exists in the present? Perhaps, commercial activity itself, which can be characterized as the reproduction of the relations and circumstances necessary to maintain the link between past and future monetary difference. The market can then be seen as a teleonomic social reality that produces a spiral structure for social time, and as a perceptual sinkhole that condenses social time at a given rate for a given social space.
Dynamic inconsistency and accruals
It would seem that the subsistence of the link between past and future monetary difference that accounting presupposes is related to the issue of dynamic inconsistency.
Marxian transformation problem & commercial time
How would the social time produced by the market relate to the Marxian transformation problem or the Marxian concept of the monetary circuit, if at all?
Cash flow & the Marxian concept of currency
What is the relationship between currency, under the Marxian meaning, and the accounting concept of “cash flow¨?
profit_realization finance accrual cash_flow social_time social_space social_science sociology economics philosophy philosophy_of_time philosophy_of_space psychology psychology_of_time psychology_of_space sociology_of_space sociology_of_time transformation_problem Marxian_economics dynamic_inconsistency time_inconsistency teleology telenomy social_reality futurology
bibliography
- “An Introduction to the Cash Flow Statement.” In Accounting and Finance for Managers. The Fast Track MBA Series. Dover, NH: PriceWaterhouseCoopers, 1999.