Question

Is QuickBooks GAAP compliant?

Forum|Forum|6 years ago
April 29, 2020
12 replies
73 views

A coworker of mine says that our small business should not use QuickBooks Online, because QuickBooks Online is "not GAAP approved yet". I am not an accountant, so I'm not sure what to think about this assertion. I understand that GAAP is a set of guidelines to ensure that accounting is done the "correct" way. I'm wondering whether my coworker's statement is true or not.
Does QuickBooks Online have the functionality to, like, comply with GAAP standards?
Does QuickBooks Desktop have the functionality to do so?
What do you think of my coworker's statement?

Rustler

Level 15

GAAP is one of 7 standard was of doing accounting, if your company is publicly listed (US stock exchange) then you must use GAAP, other wise ....

see this for more on GAAP, http://onsale-apparel.com/Rustler/gaap

But first your friend is full of it, second yes if you wanted to use GAAP in QB you can do so, there is no reason to, but you can

AdrianG001

When it comes to QuickBooks, the revenue recognition principal was not a core concern during development. QuickBooks was designed as a book keeping system. Its appeal to startup companies is that it is affordable and provides the basic needs. However, for software startups that want to grow and expand, QuickBooks is not the solution.

Software companies that are focused on growth need an accounting system that supports their business. They need a solution that at least provides general ledger, accounts receivable, and accounts payable functionality. In addition, they may want to consider revenue recognition automation, GAAP compliant financial statements, centralized database, and Sarbanes Oxley compliance.

Is QuickBooks GAAP compliant? Not on its own. To be GAAP compliant, QuickBooks needs the help of additional spreadsheets or other systems. In the long run, this means additional expense in terms of other systems and additional manpower to properly track sales. Although QuickBooks may appear to be the cheaper solution in the beginning, it will cost more in the end and the great part is that still is the most loved accounting application which is used widely by accounting community.

Regards,

Adrian

Sr. QuickBooks Cloud Consultant

john-pero

Level 12

@AdrianG001 wrote:

When it comes to QuickBooks, the revenue recognition principal was not a core concern during development. QuickBooks was designed as a book keeping system. Its appeal to startup companies is that it is affordable and provides the basic needs. However, for software startups that want to grow and expand, QuickBooks is not the solution.

Software companies that are focused on growth need an accounting system that supports their business. They need a solution that at least provides general ledger, accounts receivable, and accounts payable functionality. In addition, they may want to consider revenue recognition automation, GAAP compliant financial statements, centralized database, and Sarbanes Oxley compliance.

Is QuickBooks GAAP compliant? Not on its own. To be GAAP compliant, QuickBooks needs the help of additional spreadsheets or other systems. In the long run, this means additional expense in terms of other systems and additional manpower to properly track sales. Although QuickBooks may appear to be the cheaper solution in the beginning, it will cost more in the end and the great part is that still is the most loved accounting application which is used widely by accounting community.

Regards,

Adrian

Sr. QuickBooks Cloud Consultant

And just how do you think that QB is missing these key ingredients? Those of us rooted in QBDT since the last century have been utilizing these 3 exact tools all along. QBSE aside since it doesn't even qualify as a check register, only QBO Simple Start lacks A/P and to be sure, most mom and pop operations woudl not know what to do with the General Ledger report.

I had a client who entered all sales in JE, one for teh sale, and one for the payment, and then would reconcile the bank account, ON PAPER, and never in QB. That was an operation that should have had JE function turned off!

M

mmb3

I would say QBO is built more from a tax standard than a true GAAP standard that could hold up to an external audit on its own without manual work-arounds. With any system, you have to make accruals, but QBO is a bit clunkier because they try to oversimplify through automation and the automation is hard to work around. For instance, in my practice, I need to accrue revenue for unbilled time. Just trying to figure out how to get that number into my financials in the correct spot (rolling up to AR) was extremely tricky and still doesn't really work well because it tries to force me to make a payment against the journal entry. I have had plenty of QB specialists not understand the concept of unbilled revenue and accrual accounting. Desktop doesn't have as much of a problem because it has more bells and whistles. Technically speaking, if you can make a journal entry in a system, you can get it to GAAP.

It may be easier to ask your coworker to give you an example and we can address it specifically.

john-pero

Level 12

QBDT for certain is accrual accounting with the option of Cash reporting. Even when one makes the selection of tax tracking in company setup for Cash a reports are presented as default Accrual.

T

Teri11_2

Level 2

No SYSTEM can be "GAAP-compliant", but some work better than others to meet GAAP compliance.

GAAP (Generally Accepted Accounting Principles) are accounting practices that accountants follow, not anything that the software does for you. One part of GAAP is requirement for accrual-basis accounting.

QB and QBO are both cash-basis systems, so to follow GAAP you must work around system defaults and skip some of the automated functions that are all cash-basis, such as posting expenses from bank feeds.

Note:

Accounting is done on cash or accrual-basis.

Income taxes are done on cash or accrual-basis.

These are two different decisions that a company makes and they do not have to be the same.

Meaning is the same for accounting or taxes, cash-basis are only transactions where cash is exchanged.

There are 10 GAAP Principles, which include accrual-basis accounting. (Tax is a separate decision to make).

GAAP are accounting practices performed by an accountant not a system so no accounting software can "approved" as GAAP compliant. That is like saying a car is approved for no accidents, not possible since any car be in an accident, only the driver can have or not have accidents in the car.

T

Teri11_2

Level 2

@AugustZellmer @Rustler

No SYSTEM can be "GAAP-compliant", but some work better than others to meet compliance.

GAAP (Generally Accepted Accounting Principles) are accounting practices that accountants do, nothing any SW does for you. One part of GAAP is requirement for accrual-basis accounting.

QB and QBO are both cash-basis systems so to follow GAAP you must work around defaults and skip some automated functions that are all cash-basis, such as posting expenses from bank feeds.

Note:
Accounting is done on cash or accrual-basis.
Income taxes are done on cash or accrual-basis.
These are two different decisions that a company makes and they do not have to be the same.
Means same for accounting or taxes, cash-basis are only transactions where cash is exchanged.

There are 10 GAAP Principles, including accrual-basis accounting. (Tax is separate decision).
GAAP are accounting practices performed by an accountant not a system so no accounting software can be "approved" as GAAP compliant.

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