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Expenses - Invoices

Quickbooks Online (Accrual Accounting) has a payment (using the Invoice module and not Bill module)but not a date to list when the actual liability was incurred. I'm running into problems where a liability was incurred in particular month (or year) and the payment is being made in the following month (or year). How do I correct for this? What I have been doing is actually putting the date I incurred the expense in the payment date even though that is months prior to when we pay it. I would think it would be easy for Quickbooks to add a field labeled, "Date Liability occurred". So my A/P aging report is completely wrong and worthless because if I incur a liability on March 29 but get invoiced on April 15th and pay it on April 30th, my AP aging for that liability should be 15 days. But my report will show 32 days because I am putting in the date as March 29th so that I can recognize the expense the correct way which is the date we incur the liability and not the date we pay it. The Bill module is the same way. It has a Bill date & Due date but not a Liability Incurred date. So I just go ahead and use the Invoice Module instead (which maybe I should be using the Bill module so I can track unpaid bills). What do I do or am I supposed to be entering these expenses somewhere else in Quickbooks online?

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Best answer 07-05-2019

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Re: Expenses - Invoices

This was the solution I was looking for: https://www.accountingtools.com/articles/what-are-accrued-expenses.html An example of an accrued expense is a situation where a company receives office supplies from a supplier near the end of a month, but has not yet received an invoice from the supplier by the time the company closes its books for the month. To properly record this expense in the month of receipt, the accounting staff records an expense in the supplies expense account with a debit in the amount that it expects to be billed by the supplier, and records a credit to an accrued expenses liability account. Thus, if the amount of the office supplies were $500, the journal entry would be a debit of $500 to the office supplies expense account and a credit of $500 to the accrued expenses liability account. The journal entry is normally created as an automatically reversing entry, so that the accounting software automatically creates an offsetting entry as of the beginning of the following month. Then, when the supplier eventually submits an invoice to the entity, it cancels out the reversed entry. To continue with the preceding example, the $500 entry would reverse in the following month, with a credit to the office supplies expense account and a debit to the accrued expenses liability account. The company then receives the supplier invoice for $500, and records it normally through the accounts payable module of the accounting software, resulting in a debit to the office supplies expense account and a credit to the accounts payable account. The net result in the following month is therefore no new expense recognition at all, with the liability for payment shifting to the accounts payable account.

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Re: Expenses - Invoices

Bill or Invoice date is the date you or your customer incurs liability. Bills are what you owe. Invoices are for what is owed you. By using an invoice for something you owe you are probably entering things upside down at best. Some basics about accrual accounting. The date of service is the date of income or expense. That overrides everything and when or if paid has absolutely nothing to do with it. Say you buy something in December but do not pay for it until January - that is last year's expense, not this year. Same if you sell something - you must claim income the date you provided service/product to the customer - EVEN IF THEY NEVER PAY YOU!!!!! Income and expense are recorded as "accrued", never when paid (under accrual accounting)
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Re: Expenses - Invoices

Hi John. Thank you for the fast reply. I meant to write "Expense" versus "Invoice". In my head, I was thinking about the invoice that needed to be paid. When I click on Expense and then go to New Transaction, I have been using the "Expense" option versus the "Bill" option. I'm currently studying for the CPA exam and have a pretty strong accounting background. I meet the 150 hour requirements needed to take the CPA exam here in Texas. So back to my issue, whether I click on "Bill" or "Expense", it doesn't let me put the date I actually incurred the expense. So how does the system recognize the date the expense was incurred to your point, "Income and expense are recorded as "accrued", never when paid (under accrual accounting)"? Is there a hidden setting I need to click on to provide additional fields?
Community Explorer **

Re: Expenses - Invoices

This was the solution I was looking for: https://www.accountingtools.com/articles/what-are-accrued-expenses.html An example of an accrued expense is a situation where a company receives office supplies from a supplier near the end of a month, but has not yet received an invoice from the supplier by the time the company closes its books for the month. To properly record this expense in the month of receipt, the accounting staff records an expense in the supplies expense account with a debit in the amount that it expects to be billed by the supplier, and records a credit to an accrued expenses liability account. Thus, if the amount of the office supplies were $500, the journal entry would be a debit of $500 to the office supplies expense account and a credit of $500 to the accrued expenses liability account. The journal entry is normally created as an automatically reversing entry, so that the accounting software automatically creates an offsetting entry as of the beginning of the following month. Then, when the supplier eventually submits an invoice to the entity, it cancels out the reversed entry. To continue with the preceding example, the $500 entry would reverse in the following month, with a credit to the office supplies expense account and a debit to the accrued expenses liability account. The company then receives the supplier invoice for $500, and records it normally through the accounts payable module of the accounting software, resulting in a debit to the office supplies expense account and a credit to the accounts payable account. The net result in the following month is therefore no new expense recognition at all, with the liability for payment shifting to the accounts payable account.

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