Entering Pledges as Invoices leads to Negative Accounts Receivable

Hi there, Volunteer Treasurer.

How you present your financial report depends on what Accounting method you are using. It could either be Cash or Accrual.

If you're using Accrual basis:

• The time when you enter a transaction and the time when you actually pay or receive cash may be two separate events in this accounting method.
• An accrual-basis report shows income regardless of whether your customers have paid your invoices and expenses regardless of whether you have paid all your bills.

If you're using Cash basis:

• A bookkeeping method in which you regard income or expenses as occurring at the time you actually receive a payment or pay a bill.
• A cash-basis report only shows income if you have received cash and expenses if you have paid cash.

For more details about this, take a look at this link: Choose between cash and accrual accounting methods in reports.

To know how to fix an Accounts Receivable balance on a cash basis Balance Sheet, see this article: Resolve A/R or A/P balances on a cash basis Balance Sheet.

If there's anything else that you want us to help with, let us know so we can check that and assist you.

Hi Miriam,

We recently switched from Cash to Accrual, and we're using an accrual basis balance sheet. My question is if I'm accounting for these invoices correctly, given that we're using accrual accounting. 

Another way to ask this would be: is it acceptable to have negative accounts receivable? Or do I need to move these pre-paid pledges into a liability account?

That's helpful. Thanks!