Need to make changes or updates to your accounts or subscriptions? Visit the Account Management Page
QuickBooks HelpQuickBooksHelpIntuit

Choose between cash and accrual accounting methods in QuickBooks Online

SOLVEDby QuickBooksQuickBooks Online2179Updated August 25, 2022

Learn more about the difference between Cash and Accrual methods for QuickBooks Online and how to change between the two.

You can change your accounting method in QuickBooks in just a few steps. Just remember that each method reports your income and expenses differently. Once you change your accounting method, accounts and balances in your reports might show up differently.

Note: IRS requires you to use the same accounting method from year to year. You need to get IRS' approval first before you change your accounting method.

Which accounting method should I use?

Each method has its own pros and cons. It's important to understand how each method works so you can choose the best bookkeeping practices for your business. If you're unsure which method to use, talk to your accountant. Or, find an accountant if you need one.

Cash

When using the Cash accounting method, you record income and expenses at the time you actually receive a payment or pay a bill. 

The cash method in reports:

  • This report counts income or expenses only once you get a payment or pay a bill.
  • If you sent an invoice or got a bill but the money hasn’t changed hands yet, your report doesn’t include it in your income or expenses.

Accrual

When using the Accrual accounting method, you record income and expenses when you send the invoice or receive the bill.

The accrual method in reports:

  • This report counts income and expenses regardless of if the invoice or bill was paid or not.
  • It includes income and expenses even if the money hasn’t changed hands yet

How Cash and Accrual accounting affect sales tax

When you use the cash basis method, you report your income when you receive it.

When you use the accrual basis method, you report your income when you bill it.

In August, you send out a $1000 invoice, with a sales tax rate of 6%, for a grand total of $1060. You receive a $424 payment in August, and the remaining $636 in September.

  • With cash basis, you owe two sales tax payments, $24 for August and $36 for September, because you received payments in both August and September.
  • With accrual basis, you owe one sales tax payment of $60 in August, because you invoiced your customer in August.

Change the accounting method for your company

  1. Select Settings ⚙, then select Account and settings.
  2. Go to the Advanced tab.
  3. In the Accounting section, select the Edit ✎ icon.
  4. Choose the Accounting method.
  5. Select Save, then Done.

Change the method on a report

To see the difference another accounting method will make in your reporting, you can customize an individual report to use a different accounting method and compare the results.

To change the method used on an individual report:

  1. Go to Business overview and select Reports (Take me there).
  2. Select a report.
  3. Under Accounting method, select Cash or Accrual (you can also select the Customize button to open the Customize Report window and change the setting in the General section).
  4. Select Run report.

Was this helpful?

You must sign in to vote, reply, or post
QuickBooks Online AdvancedQuickBooks Online EssentialsQuickBooks Online PlusQuickBooks Online Simple Start

Sign in for the best experience

Ask questions, get answers, and join our large community of QuickBooks users.

More like this