Does anyone know why a credit memo applied to unpaid invoices is showing on my Profit & Loss Report based on Cash?

It is correct but I think you did not finalize the step of receiving payment and using the credit memo to pay the invoice. A credit memo remains on your books, even in cash basis, as a liability until applied or refunded. If there were no credit memo the invoice amount would not appear in a cash basis P&L but the credit memo does.

Yes, I did receive payment and applied to the correct invoices. What happens is this. I issue an invoice of $1,000 to a client and when I pull the P&L Accrual Report, it shows the $1,000 as income. Then, I create a credit memo of $1,000 and I apply it to the open invoice for the same client. Then, I pull the P&L Accrual Report, it shows 0,00 as Net Income. Up to this point everything is fine. But if I pull the P&L Cash Report, it shows -$1,000 as income. To me this is wrong as I cannot have a negative invoice in this situation as no cash was disbursed or receive in this entire process.

Yes, I did receive the payment and applied to the correct invoices. The problem that I have is this. I create an invoice for a customer on total of $1,000. Then, I pull the P&L Accrual Report and it shows the $1,000 as income. Then, I create a credit memo on total of $1,000 and apply it to the open invoice for the same client. Then, I pull the P&L Accrual Report and it shows $0.00 as income. Up to this point everything seems correct. The problem is when I pull the P&L Cash Report, it shows -$1,000 as income which is not correct. I cannot have a negative income as I didn't disburse any cash.

Hi there, @lcarvalho. 

Thank you for reaching back to the Community. I've replicated in my end, the cash vs.accrual it came out to be zero. We need to make sure when you run the report, not the same date with the credit memo. This way, it will show correct and exact balance. Then, after that you can try again running a P & L reports to double-check it.  

For you reference you can check this article: Enter and apply credit memos and delayed credits in QuickBooks Online.  

Also. I've added this article about Run Reports: Run reports in QuickBooks Online.

Please let me know if you have questions. I’ll be here to help. Wishing you the best!