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What's Unapplied Cash Payment?

SOLVEDby QuickBooksQuickBooks Online348Updated 7 days ago

If you report on a cash basis, you may see two accounts for unapplied cash payments. These accounts are automatically created by Quickbooks Online for cash-basis reporting and cannot be deleted or changed.

You'll never use these accounts directly on any purchase or sales form. The IRS requires these accounts for proper reporting of "Constructive Receipt Income"; see IRS Publication 538 for more details.

Here are explanations for each of the two account types:

Unapplied Cash Payment Income

This account is used to report cash basis income from customer payments that are received but not applied to any sales form. Simply put - you took the money in, but never declared the income on a sales form.

Usually, the date of the payment is before the invoice date it's applied to. Example: Receive payment today, invoice next week. It's "unapplied" until next week when the invoice hits the books.

If an incorrect amount is showing in this account, you'll need to apply the payment to an invoice dated prior to the date of the payment. Otherwise, Unapplied Cash Payment Income is correct.

Another possible cause is that the product or service item on the invoice is mapped to a bank account type, which will cause the amount to go into Unapplied Cash Payment Income, without actual payment being received. Make sure the product or service is mapped to an income account type to prevent this from happening.

Unapplied Cash Bill Payment Expense

This is equivalent to cash payment income but on the expense side. It's used to report the Cash Basis expense from vendor/vendor payment checks that you've sent but not yet applied to a vendor/vendor bill. This can also occur in the case that a bill is created for a credit card account balance. You'll never use this directly on a purchase or sales form.

If an incorrect amount is showing in this account, you'll need to apply the bill payment to a bill that is dated before the bill payment.

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