Learn more about the difference between the cash and accrual methods, and how to change between the two.
Cash, accrual, and cash only are three methods of reporting income and expenses. The same report can paint a different picture depending on the method you pick.
Tip: Talk to your accountant about which method is most appropriate for your company.
Cash (Mixed Mode)
When you use the cash (also known as "money received") method in reports:
- Your report will count income/sales transactions on cash basis and expenses/purchases on an accrual basis.
- Your report will count your income/sales only when you have received the payment.
- Your report will count your expenses even when they haven’t been paid.
Note: By choosing the cash accounting method, all your VAT reports will automatically change in line with the new basis.
For VAT Exceptions, QuickBooks will automatically figure out if a transaction should be marked as an exception based on its payment status and the reporting mode.
Accrual
When you use the accrual (also known as "invoice basis") method in reports:
- Your report will count income and expenses as soon as you send an invoice or record a bill.
- It will include income and expenses even if the payment has not been made.
Cash Basis only
When you use the cash method in reports:
- For both your Sales and Purchase transactions, both to be reported as Cash.
- Your report counts income or expense when you receive the payment or pay the bill.
- If you've sent an invoice or received a bill but the money hasn’t changed hands yet, your report doesn’t include it in your income or expenses.
Change the method on a report
To see the difference another accounting method will make in your reporting, you can customise an individual report to use a different accounting method and compare the results.
To change the method used on an individual report:
- Go to Reports (Take me there).
- Select a report.
- Under Accounting method select
- Accrual for the accrual method ("invoice basis").
- Cash for the Mixed Mode cash method ("money received").
- Check the Report expenses on cash basis box if you want to report on a cash basis only.
- Select Run report.
Note: The Report expenses on cash basis box will be automatically ticked for all customers who were previously reporting using the cash-only method. You can change the report to mixed mode by unchecking this box.
Mixed Mode reporting, will only be available in VAT reports such as 201 Calculation Report, VAT Detail report and Return of Tradings Details Report. All other reports will be reported on a cash or accrual basis.
You can also select Customise to open the Customise report window and change the setting in the General section.