When will profit figures differ between cash and accrual accounting?

Profit figures will differ between cash and accrual accounting during the accounting period because these two methods recognize transactions differently.

In cash accounting, revenues and expenses are recorded only when cash is received or paid. This means that if a sale is made but not paid for at the time, it won't be recorded as revenue until the cash is actually received. Similarly, expenses are only recorded when cash is spent, regardless of when the services or goods were consumed.

On the other hand, accrual accounting recognizes revenues and expenses when they are incurred, regardless of the timing of cash flows. Therefore, a sale would be recorded as revenue as soon as the goods are delivered or services provided, and expenses would be recorded when the obligation is incurred.

This fundamental difference leads to variations in profit figures during the accounting period because one method may recognize revenues or expenses earlier or later than the other, depending on the timing of cash transactions. Thus, the differences in financial results based on the method used can be seen throughout the accounting period, not just limited to year-end reporting or any particular situation such as audits or cash flow challenges.