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@qbteachmt wrote:

 

 

A Cash Basis entity uses AP and AR in QB just fine. They use that to manage those delay, tracking aging, etc, the same as an Accrual basis entity. And that is why they would use them for the Transition, with the same original info as their old system. And that's why the concepts from that training are inadequate.

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You talk about "Cash Basis entity", which I assume means from a tax point of view,  as if the tax status is the entire defining characteristic of a business.  You should mention that that is a tax definition.

I can't imagine why anyone would file taxes on the cash basis, but keep the books on the accrual basis.  The whole point of the IRS allowing taxpayers to file taxes on the cash basis is to relieve them of the burden of keeping the books on the accrual basis.  For that tiny % who do,  they may have to use the actual expense from last year, as you describe, when entering open bills at the start date, instead of OBE.  

For the rest - the vast majority -  who keeps the books on the accrual basis and also file taxes on the accrual basis, then the best way to enter the AP and AR balances is with Opening Balance Equity, as I described above.

I realize this seems to be a mystery to you: "I can't imagine why anyone would file taxes on the cash basis, but keep the books on the accrual basis"

Let's review: I use invoices to show when this sale is considered to be done, this invoice has my Services and Noninventory and Other Charge type of charges to you, this Sales Date, it is Unpaid, so this has your terms, which helps me manage due dates and aging. It won't show on Cash Basis reporting until you Pay and then for the date you Pay. This is my perspective of the overall business revenue activity, customer account management, timely payments, assessing late fees, etc.

That is Important to all businesses. We all should run our reports on Both Basis.

Your verbiage did not help.  I still can't imagine why anyone would file taxes on the cash basis, but keep the books on the accrual basis.   The whole point of the IRS allowing taxpayers to file taxes on the cash basis is to relieve them of the burden of keeping the books on the accrual basis.

@Malcolm Ziman

"I still can't imagine why anyone would file taxes on the cash basis, but keep the books on the accrual basis"

Well, I do. I keep track of when I made the sale to the customer = Invoice Date. I listed the direct time and costs. It has a Due Date. I track when someone isn't paying on time.

My Year End reports are set to Cash Basis, so these do not show. I run Accrual Basis reports, as well, to see overall performance. I would also use that to determine if I can offer a discount or write off or some early pay incentive to the customer, such as, their payment is two months late because they ended up Selling the business, so we negotiate a final payment. That's my Management Decision, and that is why you also run Accrual Basis reporting, as a Cash Basis entity.

I need to manage my customers and sales and that is Invoices.

You don't need to Imagine it; it's Factual.

@qbteachmt @Malcolm Ziman @Rustler 

Just ran into this and had to correct this:

You said there is a tiny % of companies who do accounting on accrual-basis and taxes on cash-basis.

This is definitely not true and the answer is relevant to users here and some become my clients later.

There are 4 million Govt contractors, all started as new/small business and many start on QuickBooks.

Since Govt contractors MUST do Accrual-basis accounting, many do cash-basis for taxes for the same

reason as any company (to not pay taxes on revenue not yet received).  ALL of my 98 clients do this,

except for those few large who are public corporations so must also do taxes on an accrual basis.

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@Malcolm Ziman wrote:

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@qbteachmt wrote:

I can't imagine why anyone would file taxes on the cash basis, but keep the books on the accrual basis.  The whole point of the IRS allowing taxpayers to file taxes on the cash basis is to relieve them of the burden of keeping the books on the accrual basis.  For that tiny % who do,  they may have to use the actual expense from last year, as you describe, when entering open bills at the start date, instead of OBE.  

 

For the rest - the vast majority -  who keeps the books on the accrual basis and also file taxes on the accrual basis, then the best way to enter the AP and AR balances is with Opening Balance Equity, as I described above.

 

 

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@qbteachmt @eseeacuity @Malcolm Ziman @Rustler 

Most accounting systems do not provide reports including/excluding AP/AR.  So there is no real need to run reports on both cash and accrual basis.  It is actually very misleading for people to think they can just choose a reporting option and magically they are doing accrual-basis accounting, that is not "factual."

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@qbteachmt wrote:

That is Important to all businesses. We all should run our reports on Both Basis.

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