What Is the Difference Between Cash Basis and Accrual P&L in Dentistry?
A Profit and Loss Statement (P&L) can be prepared on two different accounting bases: cash basis or accrual basis.
- Cash Basis P&L – records income and expenses when money is received or paid.
- Accrual P&L – records income when treatment is delivered and expenses when incurred, regardless of payment timing.
Why Does This Distinction Matter for Dental Practices?
Most dental accountants produce cash basis P&Ls from Xero or QuickBooks. The problem: cash received ≠ revenue earned.
- Overstated Profit: Deposits collected upfront show as income, even if treatment hasn’t been delivered.
- Incorrect Tax Bills: HMRC sees higher “profit” than reality, increasing corporation tax or self-assessment.
- Distorted Decision-Making: Owners think they’re more profitable than they are.
Example:
- Invisalign patient pays £3,000 in January.
- Cash Basis P&L → shows £3,000 revenue.
- Accrual P&L → shows £600 earned in Jan (20% of treatment completed), £2,400 deferred until treatment delivered.
Only the accrual method reflects the true financial position.
Cash Basis P&L vs Accrual P&L
| Basis | When Income Recorded | When Expenses Recorded | Example in Dentistry |
| Cash Basis | When money received | When money paid | £3,000 Invisalign deposit in Jan = full revenue |
| Accrual Basis | When treatment delivered | When cost incurred | £600 Jan revenue recognised (20% completed) |
How Does DentPulse Handle Cash vs Accrual P&L?
| Feature | Function |
| Revenue Recognition Engine | Records income when treatments are delivered, not when paid |
| Deferred Income Ledger | Holds deposits as liabilities until earned |
| EEE™ (EBIT Efficiency Engine) | Ensures P&L reflects true profit margins |
| PPP™ Overlay | Prevents drawings against unearned deposits |
| Tax Module | Aligns corporation/self-assessment tax to accrual earnings |
DentPulse produces a true owner-level P&L — not just an accountant’s cash record.
DentPulse Tip™
“Cash in the bank doesn’t mean profit earned.
The only P&L that matters is the one aligned with treatment delivery — the accrual P&L.”
Related Glossary Terms
- Profit and Loss Statement (P&L) – overall report
- Revenue Recognition – the principle behind accrual accounting
- Deferred Income – deposits held until treatment is delivered
- Profit-to-Pocket™ – ensures only earned profit flows into drawings
- EBIT Efficiency Engine (EEE™) – accrual-based profit tracking
Glossary Summary Table
| Term | Meaning |
| Cash Basis P&L | Records income/expenses when money moves |
| Accrual P&L | Records income/expenses when treatment/work is done |
| DentPulse Advantage | Tracks accrual earnings automatically, preventing tax and profit errors |
