Discrepancy on Cash Basis

I’m glad to see you in the Community today, lyndaajsllc.

Let me provide some information on how the accounting method affects the data in your reports.

The Cash and Accrual basis in QuickBooks Desktop are methods of reporting income and expenses. The former will report income or expenses only once you get a payment or pay a bill. Also, it will only show income if you have received cash. This includes all your other income accounts.

In the Accrual accounting method, you record income and expenses when you send the invoice or receive the bill. Here’s an article that provides in-depth information about these types of reporting methods: Differentiate Cash and Accrual basis.

Additionally, this article contains different topics about building reports. It contains topics about setting the reporting preferences, customizing the statement, creating memorized reports as well as combining them: Customize reports in QuickBooks Desktop.

Click the Reply button and post a comment if you have other concerns about reports. I’m always ready to assist further. Have a great rest of your day.

@lyndaajsllc ,

An accrual based report uses the income accounts tied to Invoices and Sales Receipts to report income regardless of when customers pay... and it uses Expenses on expense transactions with no regard as to when those amounts are paid.  That's all there is to it.

Conversely, a cash-based report only includes income when payment has been received, and only includes expenses when they are paid.  That's all there is to it.

No matter if a customer uses Quickbooks Desktop or Quickbooks Online, or any other system, the concepts involving Accrual vs Cash methods for reporting do not change.   

Here is a walk-through of how to prove the calculations behind Cash vs Accrual Income, using the QBO demo.  When you're comfortable with how the software/platform calculates, you will be better equipped to address your customer's concerns.

https://c23.qbo.intuit.com/qbo23/samplecompany/validated?SKU=7&arg=QBOA&companyId=1000&recievedTimes...

Go to Reports > Profit and Loss Report.  Use This Year to Date for report period.

Accounting method is at top.  Default is accrual, Income reported is $10k-ish.

Now switch to Cash method.  Run report.  Income reported is $5k-ish.

Drilling down, ie, clicking on the various components of that Income total, will show you what transactions were included under each reporting method.

When reported under the Accrual method, the first Income account, Design Income, is $2250, and we can see that four Invoices and two Sales receipts make up this total.   Make a note of #1007's amount, it's $750.

When reported under the Cash method, the first Income account, Design Income, is $862.50, and we can see that one Invoice and two Sales receipts make up this total.   #1007 is now reporting only $300 as income, because that's all that was received so far.

Note:  Some of those invoices have additional amounts charged to accounts other than Design Income... to keep this simple, we'll pick on #1007 which is entirely Design Income.  Total invoice, $750.  Accrual basis income, $750. Cash basis income, $300.  Difference, $450.

Now:  Reports > A/R Aging Detail, go to Open Balance column, far right.

1007          450.00

There you go!  A tiny proof that the cash basis method doesn't report income until the payment is received.  Gotta love that drilldown capability, and thanks for your great question!!!

Hi Kim - Yes, I know the difference between cash and accrual methods, I am an accountant.  The software company hired me to assist with QB integrations.

What I am saying is that there is a discrepancy on the totals of the cash basis P&L report.  The report shows total income of $996,750.48.  But if you add up all of the income accounts, the true total is $950,495.47.  Both cash and accrual are showing the same income accounts, but the accrual report totals correctly.  The cash basis report does not.  That's what I am seeking assistance with, not the cash vs accrual reporting itself.  Thanks.

Hi Rasa-LilaM - Yes, I know the difference between cash and accrual, I am an accountant.  The software company hired me to assist with QB integrations.

 What I am saying is that there is a discrepancy on the totals of the cash basis P&L report.  The report shows total income of $996,750.48.  But if you add up all of the income accounts, the true total is $950,495.47.  Both cash and accrual are showing the same income accounts, but the accrual report totals correctly.  The cash basis report does not.  That's what I am seeking assistance with, not the cash vs accrual reporting itself.  Thanks.

@lyndaajsllc  Just to clarify, are you saying that the totals of each of the individual income accounts are the same and only the 'Total Income' shows a discrepancy between cash and accrual? That would be very unusual.  Or, are you saying that the totals of some or all of the individual income accounts have discrepancies between cash and accrual?  If it's the latter, then that is most likely just simple timing differences between cash vs. accrual accounting.  It sounds like you expect the income totals to match.  Depending on the nature of the customer's business and their accounting process, I wouldn't expect them to match unless they're in retail possibly.  Do you have access to their company file so that you can run the reports yourself?      

@lyndaajsllc ,

Have them send in Excel instead of PDF, with no rollups in the report.

I even pulled the sample cash basis P&L from the demo and see nothing strange with its total, made sure with my 10-key.

The fact that accrual basis is behaving makes it even stranger -- look for an account with a title that doesn't sound like income that is only appearing on the cash basis and is zeroed out on the accrual basis?

We're both going to learn something from this post, fellow beancounter!  Thanks for the opportunity!

@lyndaajsllc 

RE: The cash report had a discrepancy in the total income reported versus the total sum of the individual accounts. Has anyone ever encountered this type of discrepancy and what the cause could be?

No, I've never seen that before or even heard of it.  I think subtotals on reports really are just that - the total of whatever numbers appear above.

When the customer views the report in QuickBooks, does it display the same issue (before it is sent to a PDF file)?

I don't think importing could have anything to do with this - could cause the P&L to not subtotal correctly. If the imported data was wrong, that would be reflected in one of the accounts.

I am saying the former.  The total income on the report equals $996K, but the total of all of the income accounts on the report only equal $950.  I unfortunately do not have access to their QuickBooks but the support manager here is going to schedule a call with the client so we can try to guide them through and see if we can identify it.  At that time, I will ask them for Excel reports so that I can see if there is something hidden. I find it odd that there would be an income account that doesn't show on the accrual report.  Maybe there is a journal entry that their accountant did that was not reversed or otherwise resolved.