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Level 1

How does changing to accrual-basis accounting from cash-basis affect the data and reporting for prior years that have had their "books closed" in QB Online?

 
3 Comments
QuickBooks Team

How does changing to accrual-basis accounting from cash-basis affect the data and reporting for prior years that have had their "books closed" in QB Online?

Hello there, abdul4.

 

The Accounting Method doesn't have any bearing on the transactions and whether the books are closed or not. It only has an effect on the reports. For example, in an Accrual method, all unpaid invoices will be reported as income on your P&L, regardless of the report date. However, in a Cash method, they will only reflect in the P&L on the day they are paid, and whether the books are closed or not.

 

You can refer to this article about cash and accrual accounting methods in reports.

 

Let me know if you have more clarifications by leaving a comment below. Stay safe!

Level 15

How does changing to accrual-basis accounting from cash-basis affect the data and reporting for prior years that have had their "books closed" in QB Online?

And keep in mind that if you make that change then you also need to file a form 3315 with the IRS to get permission to change

Level 8

How does changing to accrual-basis accounting from cash-basis affect the data and reporting for prior years that have had their "books closed" in QB Online?


This explains how QB handles accrual vs. cash basis REPORTS but does not explain accrual-basis accounting and how the entries should be recorded, which is about dates used to input the entries.

 

For example, if you received a vendor invoice dated 11.10.20 for services used in October, that invoice needs to be posted in October vs. November if you are doing accrual-basis accounting.

 

Likewise, if you earn revenue in October, that revenue needs to be recorded in October vs. Nov. even though you will not be paid until the following month. 

 


@AlexV wrote:

Hello there, abdul4.

 

The Accounting Method doesn't have any bearing on the transactions and whether the books are closed or not. It only has an effect on the reports. For example, in an Accrual method, all unpaid invoices will be reported as income on your P&L, regardless of the report date. However, in a Cash method, they will only reflect in the P&L on the day they are paid, and whether the books are closed or not.

 

You can refer to this article about cash and accrual accounting methods in reports.

 

Let me know if you have more clarifications by leaving a comment below. Stay safe!


 

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