Accounting Period

We are grateful that you are back in the Community forum, Sandy. We appreciate you using the Community to voice your concerns. Please allow me to provide you with some information on this.

I understand how convenient it is for you to choose the basis of accounting period you want to display in your QuickBooks Desktop.

The accounting period in QuickBooks is determined by the accounting method employed. When using the accrual basis, the accounting period is when you enter a transaction, pay, or receive cash. On the other hand, if you operate on a cash basis, the accounting period begins when you receive a payment or pay a bill. Moreover, how the accounting period is displayed is one of the features of the QuickBooks Desktop.

You might want to read the following article for more information on personalizing and adding specific information to your invoice and other form styles in QBO: Customize sales forms.

Visit this article to learn the difference between Cash and Accrual basis and how to set them as preferences in QuickBooks Desktop for Windows: Differentiate Cash and Accrual basis.

Keep us posted if you need further clarifications regarding the accounting period in QuickBooks Desktop. We're available 24/7. Have a nice day!

another useless answer from the QB Team (Thanks again)...

ONE real solution would be to do what EVERY accounting system does. Allow a batch of expenses to be entered with the date incurred, Then allow the user to go back in and pay the batch, on the real payment date.

Another more painful would be to have each LINE of entry carry it's own date.

Then the expenses line could be dated when incurred (along with a matching credit to A/P), and a payment (cash) line could be the true present date (along with a matching debit to A/P). The QB system should insure that the debits and credits to any date will net 0

QB is extremely frustrating in that they ABSOLUTELY MUST know of this problem, and therefore it's also painfully obvious that they have NO INTENTION of fixing it.

I replied in the other thread, but to restate:

It is shocking that QB has not addressed this after all these years.  Do they know anything about Generally Accepted Accounting Standards?  Just using this accounting system could make an auditor question the reliability of a company's financial statements. 

So, it's February 2023 and I receive an invoice (called a "Bill" in QB parlance) from a vendor dated November 11, 2022.  What is the solution?  Open a closed period in a closed year and enter the bill into payables?  OR put a FAKE invoice date to force it into the current period?  Does that sound like a good practice?  Any decent system has an accounting date for a transaction as well as recording the date on the document.

I would guess the lack of an accounting date is one of the main reasons companies outgrow QB early on.  Also, the QB Team's lack of knowledge on why this is even a problem does not inspire confidence.

Your reply does not address the OP's concerns and seems patronizing at the least.  As accountants, we KNOW the difference between accrual and cash-based accounting.  Fancying up a sales invoice has nothing to do with recording expenses on a cash or accrual basis!  

Let's use a utility bill and accrual-basis accounting as an example....but this would hold true for a whole number of expenses.  The utility bill is dated 03/05/2023 but is for services from 02/01/2023 to 02/28/2023.  The bill would be entered into QBO with the actual billing date (03/05/2023) and would therefore show up as an expense on the March P&L.  This is totally wrong.  This expense should show up in the February P&L.  If we had a "posting date". the bill could be entered correctly (03/05/2023) with a posting date of 02/28/2023 and the P&L would reflect the correct amounts.

I use QBO and don't understand why Quickbooks does not address this glaring issue.

My favorite is I run payroll for 01/01-01/31/23 and pay it out on 02/06/23. Even though the system pulls the hours from QB Time and clearly has the pay period for January, despite being setup on an accrual basis it books all expenses in February. This is not accrual accounting!

Hello there, @AliB2.

Let me share some insights about how QuickBooks Desktop (QBDT) tracks payroll expenses using the accrual accounting method so you can manage your transactions accordingly.

QuickBooks tracks your payroll expenses based on your paycheck date (02/06/23), not on your pay period (01/01-01/31/23). This is why the system booked your expenses and liabilities in February. With this, all your payroll reports, forms, and tax liabilities are based on the pay date.

If you wish to learn more about the accrual accounting method in QBDT, please see this article: Cash and Accrual basis.

Also, you may want to visit this page as your reference to learn more about how the IRS defines constructive receipt in recording payroll expenses: IRS Publication 334, Tax Guide for Small Business.

Please feel free to leave a comment below if you have other concerns about managing payroll transactions and accounting methods in QBDT. I'm always ready to help. Take care, and I wish you continued success, @AliB2.

My point exactly. This is called a cash basis not accrual basis.

QB needs to keep track of the paycheck date only to calculate the timing of the payroll tax deposits.  If the system knows the pay period end date then an accrual-basis accounting system should report the payroll and the payroll expenses on that date....NOT the paycheck date.

@Rea_M

Exactly.  Thanks for your "insight." We know how Quickbooks is posting payroll.  Our point is that QB is doing it incorrectly.  This is not GAAP (Generally Accepted Accounting Principals).  This is not even the Accrual method as defined by any accounting association.  I'm guessing this is an example of programmers or customer service attempting to explain accounting to accountants.  Repeat:  Quickbooks is posting to the wrong period.  It is being done incorrectly.

Greate point and I am also interested in why QBO Support continues to respond and support Cash Basis of Accounting when the context and focus of the conversation is Accrual Basis. The only way Accrual Basis can work is having an explicit field for GL DATE, ACCOUNTING PERIOD, etc that a user can enter. Else, you are not compliant or supportive of Accrual Accounting.

@princesstiki1 

RE: So, it's February 2023 and I receive an invoice (called a "Bill" in QB parlance) from a vendor dated November 11, 2022. What is the solution? 

The date on the invoice/bill that your vendor sent you three months late isn't important to you. That's their date, not yours.

Usually, in this case follow the GAAP rule of discovery and enter the Bill on the date you received it - the date you discovered it existed.

Also you could ask your vendor why they didn't send you the bill/invoice for three months.

RE: Any decent system has an accounting date for a transaction as well as recording the date on the document.

I find that interesting, as several in this thread here have mentioned variants of that idea, but no accounting system I've ever used had that concept. I don't see the point, really.  How would this be helpful in your case, where your accounting period is long closed?  If one of those dates was during that period, then it would change your reports for the period, right? And if so, is seems that would defeat the point of closing the period.

@mmurrell1  RE: The utility bill is dated 03/05/2023 but is for services from 02/01/2023 to 02/28/2023. The bill would be entered into QBO with the actual billing date (03/05/2023) and would therefore show up as an expense on the March P&L. This is totally wrong. 

It seems exactly right to me. There is no requirement I've ever heard of to record expenses from a periodic bill as of the date that service is rendered - or in any case the date the vendor thinks it was. By that measure you'd need to record an expense on every day of the utility bill's period.

@BigRedConsulting 

"in this case follow the GAAP rule of discovery"

What is the GAAP rule of discovery?  I've never heard of that term, heard it mentioned in an accounting setting, and it isn't mentioned in any CPA exam materials  There is GAAP's matching principle which would apply to a utility bill received in a subsequent month.  The matching principle stipulates that the utility expense should be dated in the same month as the revenues it helped generate. 

I find that interesting, as several in this thread here have mentioned variants of that idea, but no accounting system I've ever used had that concept. I don't see the point,really.

The reason it would be advantageous is because you want to be able to date the bill to match the vendor's date so the payment terms are calculated properly (net 30 for example), and then have a separate transaction date for financial reports.  It's common on ERP systems.  

"There is no requirement I've ever heard of to record expenses from a periodic bill as of the date that service is rendered "

The requirement is GAAP's matching principle.

"By that measure you'd need to record an expense on every day of the utility bill's period."

There's no need to record an expense every day because you only need to match the cost with the period, which for essentially every business is a month.  The issue is that QB doesn't allow you to post the expense in one month and have the bill date (for payment terms) in a different month.  For larger businesses, this is a big deal. 

@Rainflurry 

RE: What is the GAAP rule of discovery? I've never heard of that term, heard it mentioned in an accounting setting, and it isn't mentioned in any CPA exam materials 

Well, maybe it's not GAAP, and instead an IRS rule. I know it applies to payroll as I worked in that industry for years. For example, if you find out you didn't record a paycheck for someone - because you didn't know it existed - you don't need to back-date it to the actual date it was written, which may be in a previous tax-reporting period, which in turn would then create mayhem. Instead, you can record it on the date you discovered it existed and then remit the taxes and such, and report it as earnings, on that date.

I had suspected the same thing is true for other business transactions. Such as the vendor invoice/bill a person in this thread that was sent three or four months late. For something. It's unclear if it's value was received three or four months ago by the recipient (if at all), and if not that date from the Vendor is just a fantasy that can be ignored, IMO.

Similarly, while it may not exactly be according to GAAP to record paychecks and their expenses on the payroll date, at the same time there is no tax liability until you actually pay an employee. The IRS indicates that as far as they are concerned, it is OK to delay the expenses in your books for payroll until payday, partially because it's a recurring and regular expense - and journaling party of every payroll that's on the cusp back to the previous period to push the expenses back (the likely case) wouldn't accomplish much over time:  You'd push some days' wages at the beginning of the Quarter into last quarter and then next quarter push wages back into this quarter - probably mostly a wash, so there's little point (it's probably not material).

At the same time, larger businesses often accrue unpaid wages and payroll tax liability estimates at the end of a reporting period to capture the likely expense, and then reverse that accrual the day after the reporting period. And then pay the employees as usual on payday. This is also how it can be done in QuickBooks - when it matters / is material.

RE: The reason it would be advantageous is because you want to be able to date the bill to match the vendor's date so the payment terms are calculated properly (net 30 for example), and then have a separate transaction date for financial reports. It's common on ERP systems.

Do you mean "Enterprise Resource Planning" systems? If so, yea, QuickBooks isn't that!

QuickBooks does offer the more important of those dates, at least.

I see your point about tracking the due date using terms. I'd never thought of that (probably because I don't do that and don't care to...) But you can also enter the due date on the bill, which is not hard.

RE: There's no need to record an expense every day because you only need to match the cost with the period, which for essentially every business is a month.

Yes, that makes sense.

RE: The issue is that QB doesn't allow you to post the expense in one month and have the bill date (for payment terms) in a different month. For larger businesses, this is a big deal. 

It's a big issue just for the terms? Why not just enter the due date on the Bill instead of using terms?

@BigRedConsulting 

"It's a big issue just for the terms? Why not just enter the due date on the Bill instead of using terms?"

Because in the industry I was in (retail), many vendor's invoices don't have a due date - they just have an invoice date and terms.  How would you enter the due date for a vendor bill dated Feb. 5 with terms of Net 75?  Or even Net 60 without using a calendar?  Pretty time-consuming. 

"Do you mean "Enterprise Resource Planning" systems? If so, yea, QuickBooks isn't that!"

Agreed, but calling it QB Desktop "Enterprise" gives the impression that it essentially is.

@Rainflurry 

RE: Because in the industry I was in (retail), many vendor's invoices don't have a due date - they just have an invoice date and terms.

Interesting. I didn't know. It seems somewhat odd that the vendor expects their customer to figure out the due date. What if the parties arrive at a different answer?

I guess I just figured that the reason Bills let you enter the due date and the discount date directly is because using terms to calculate the dates is too involved for many users and it's easier to just enter the dates. Different use case, I guess.

RE: How would you enter the due date for a vendor bill dated Feb. 5 with terms of Net 75? Or even Net 60 without using a calendar? Pretty time-consuming. 

I'd use Excel. And it's very fast. Just enter the invoice date and the days:

@BigRedConsulting 

What if the parties arrive at a different answer?

There's still only one correct date.  45 days from Feb. 5 is  Mar. 22.  Thankfully, vendors weren't that scrupulous regarding the exact date payment was received.

I'd use Excel. And it's very fast.

Good point re: Excel but I was being a bit rhetorical.  Terms include more than just the due date, they include discounts too.  So, now I need to use Excel for the date and enter a formula on the bill in QB - potential errors each step of the way - date entered in Excel, days entered in Excel, due date entered in QB, discount formula entered on bill.  Even with that, now my bill amount doesn't match the vendor's invoice amount because it needed a manual discount on the bill because I can't use the terms in QB because I need to change the invoice date to match when I need to recognize the transaction.  Also, when vendors send statements, usually the invoice amounts listed on the statement are before the discount is applied so to reconcile the statement, I can't use the Unpaid Bills Detail report because the open balance doesn't match whereas if I was able to use terms, I can quickly reconcile the statement based on open balance and terms.  All of this because I needed to manipulate the date of the bill.  

This thread is specific to QB "Enterprise".  If Intuit is going to call the product that, I (along with several other posters on this thread) think it should operate as most ERP systems do - an invoice date and a separate transaction date.  There are workarounds for sure but it increases the time required to enter transactions and introduces potential errors in the process.  Enterprise customers generally have a higher volume of entries so it would be helpful to have both dates.