Cash to accrual outside of AR and AP

Derek Fitcher · ‎October 31, 2018

I have a client that uses accrual for his business but cash for his tax returns. When we switch the reports from accrual to cash only transactions affecting accounts payable and accounts receivable are removed. We still have prepaid expenses and accrued expenses that need to be adjusted manually to get a true cash financial statement. I have considered moving these accounts to an AR or AP type to fix this, but it definitely looks weird on the balance sheet when this is done. Is there another way that QuickBooks can handle these types of accounts or any changes on the horizon that I may not know about?

Rustler · ‎October 31, 2018

I'm confused why the balance sheet in cash basis is a concern for income taxes. Income taxes deal with income and expense, any prepaid expenses would be on the balance sheet.

qbteachmt · ‎October 31, 2018

For this:

"We still have prepaid expenses and accrued expenses that need to be adjusted manually to get a true cash financial statement."

You don't Make the adjustment in QB; you take the values into consideration for tax reporting.

"Accrued" expense would be AP bills. That already doesn't show on cash basis reporting.

If you want your client Not to have prepaid expense, then they need to Stop Posting it as an other asset. Tell them to use Expense directly.

Whatever you decide, avoid using JE for this. That would be a mistake, in QB.

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