Laura Prebble, the owner-manager of a small business, had carefully monitored her cash

position over the past financial year, and was pleased to note at the end of the year that the

cash position was strong, and had shown a healthy 50% increase over the year. When

presented with the income statement for the year, she was dismayed to note that the profit

earned in the last year had deteriorated significantly and had become a loss for the current

period. In her anger, she accuses you of having made errors in the accounting since such a

silly situation could not possibly exist.

Required

Draft a response to Laura.