Cash vs Accrual basis reports

I'd be glad to provide information concerning the reports run on a cash and accrual method, @Tibo88.

First, I'd agree that you can run an Accounts Receivable report on an accrual basis. However, running reports with these methods have its pros and cons. Thus, it's important to understand how it works so you can choose the best bookkeeping practices for your business.

That said, it would be best to seek professional advice from your accountant. This way, they'll be able to share with you the best method to use in running your reports.

You can utilize our Find an Accountant tool to look for one in your area if you're not affiliated.

Furthermore, you can also check this article for more details about the difference between the accounting methods, and how to change between the two: Choose between cash and accrual accounting methods in QuickBooks Online.

Please let me know if you need clarification about running reports in QBO, or if there's anything else I can do for you. I'll be standing by for your response. Have a great day, and stay safe! 

Hello,

We are having the same issue and our CPA has said the change in accrued revenue is taxable.  Has anyone figured out a workaround for this problem in Quickbooks Online?

Hello there, @LBSusan.

I am here to share insights about running financial reports on accrual basis in QuickBooks Online (QBO.)

Running reports will depend on the accounting method because each method will run the income and expenses differently. You can refer to your accountant on what accounting method you will use to ensure that the report displayed is accurate.

Also, let me walk you through how to change the accounting method in QBO.

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

Moreover, I'm adding this helpful article as your reference in customizing reports in QuickBooks Online: Customize reports in QuickBooks Online.

Come back to this post if you have further concerns and follow-up questions about running reports and accounting methods in QBO. I'll be here to lend a helping hand. Have a good one!

Good morning.  Thank you for the information.  I know how to run the reports.  What I don't know is what QBO does in the background when running cash basis reports at tax time. In accrual accounting, which we use, AR and accrued revenue come into play but those items are not used in a cash environment.  

I appreciate you for coming back here at the thread, @LBSusan. Let me share further insights regarding cash and accrual basis reports. 

QuickBooks Online works cash accounting by recording income and expenses as they are billed and paid. It records expenses when money leaves your account to pay suppliers, vendors, and third parties. However, in the accrual accounting method, income and expenses are recorded once billed and earned, regardless of when the money is received. 

It might be helpful to consider reaching out to your accountant to discuss your concern further and to know the appropriate accounting method that will be used to ensure that the report is accurate.

On the other hand, I suggest scanning this article to understand more about the cash and accrual basis differences: Differentiate Cash and Accrual basis. 

If you have follow-up questions, let me know by leaving a comment below. I'm more than happy to help you again. Keep safe!

Thank you Kayepe.  I am not making myself clear based on your response.  I have been in touch with our CPA.  We keep accrual books but taxes are based on cash accounting.  This time of year we are running cash basis reports to assist us in monitoring our tax liability.   

The problem here is that I am not confident that the cash income conversion is working properly.  When I run a cash basis P&L and I click on the details of income, I see all the accrual journal entries included.  Since accrual has no place in cash accounting, I am wondering why all those entries are included in a cash report.  

Susan

@LBSusan 

In QB, journal entries (JE) show on cash and accrual basis reports.  This has been a complaint about QB (Desktop and Online) for years.  A simple check box to ignore JEs on cash basis reports would solve this but has not been implemented.  For QB's cash vs. accrual reports to be accurate, users must use bills, invoices, and credit memos.  JEs to move A/R credits to a liability account will improperly show on cash basis reports for example.     

Hello Rainflurry,

That is exactly what I am talking about.  Can you please tell me more about your comment "or QB's cash vs. accrual reports to be accurate, users must use bills, invoices, and credit memos. "

We use invoices to bill our clients in the current month, then journal entry the invoice to the proper month.  Are you saying we should use credit memos to move the invoice to the proper period?

Thanks in advance.

Susan

@LBSusan 

"We use invoices to bill our clients in the current month, then journal entry the invoice to the proper month. Are you saying we should use credit memos to move the invoice to the proper period?"

I'm not sure I understand what you're trying to accomplish.  Can you explain why you need to move invoices?  For invoices, QB uses the invoice date for accrual reports and the payment received date for cash basis reports.  Credit memos hit your financial statements as of the credit memo date for accrual basis and the date the credit memo is applied for cash basis.  JEs bypass QB's ability to do that.      

We are an accrual shop.  We move invoices so they appear in the month in which the services were rendered. For example, we just completed issuing invoices for November services.  Since those invoices were issued in December, we record a journal entry to reverse them to November.  If we did not do that, the revenue would be recognized in December and would not match our pipeline.  

@LBSusan 

Another consistent complaint is QB's inability to recognize revenue on a different date than the invoice date.  It seems like it would be easy enough to create a second date field and a check box that allows users to specify which of the two dates to use for revenue recognition.  Unfortunately, that's not an option.  Any JE to move invoices bypasses the cash vs. accrual filter as you're aware.  Instead of using a journal entry, a workaround to move the invoice to November is to create the invoice dated December for services in November as you currently do.  Then, create a credit memo dated December that cancels out the effects of the invoice.  Then, copy the December invoice and date it November.  Since you will need to receive payment on the November invoice (but the customer will be referencing the December invoice), you will want to customize invoice numbers if you don't already.  That will at least give you accurate cash vs. accrual reports.  If you receive payments through QB Payments, that may cause issues but I'm not 100% sure on that.      

Hi, thanks for the idea.  I will talk with our bookkeeper about trying this approach.  Happy Holidays!