Seeking Best Workflow for Accrual Basis Recordkeeping needing cash basis for Tax with linked CC and Checking Acct in Banking as payment methods

Anonymous · ‎October 05, 2022

I am doing bookkeeping for a company that has just started using QBO. They have already linked and imported their corporate credit card and checking account transactions YTD. They want to see their business on an accrual basis but still be able to run cash basis reports at end of year for tax accounting purposes.

From what I gather, the best way to do this is to choose accrual method in QBO and then to make sure that all transactions (revenues and expenses) that belong in different periods than when paid are then accounted for using Invoices for the Income side and Bills for the Expense side, so that the correct accounting period can be picked up (by the invoice date and bill date). Is that the best way in QBO to get revenue and expense accruals correct (rather than creating reversing journal entries or other method to reclass P&L to correct period)? And does this need to be done for ALL revenues and expenses, or just the ones that are different accrual periods than paid/received periods?

Since this Company is not yet using the Invoice feature and has not yet started using Bills, the money in was being added as Deposits and the money out as Expenses. What then is the right workflow for these already imported CC and checking account transactions to connect them to Invoices and Bills? Do they have to be reclassified in Banking as A/R and A/P, or is there a better way?

SarahannC · ‎October 09, 2022

Hi there, JLN25.

I've come to share a few insights about Cash and Accrual accounting methods.

We can't even tell what accounting method to use. Each method has its own pros and cons. It's important to understand how each method works so you can choose the best bookkeeping practices for your business.

I highly recommend consulting with your accountant if you're unsure which method to use, This is to ensure your books are updated and avoid messing with them.

For more information about cash and accrual accounting methods, you can read this article: Choose between cash and accrual accounting methods in QuickBooks Online.

Feel free to add a comment below if you have any other questions about cash and accrual basis of accounting, I'll be glad to help you. Have a great day ahead!

Anonymous · ‎October 11, 2022

Hello SarahannC,

Thanks for your reply! The company does know that it wants to have accrual basis reporting for management analysis purposes but will remain cash basis for tax purposes.

I believe the way that QB best handles companies that desire the ability to use both is to be setup as accrual method but be careful about workflow so that transactions will flow accurately in Reports when toggling between, for example, Profit and Loss cash radio button and Profit and Loss accrual radio button.

The remaining questions are, what is the best workflow, given that the company uses linked credit card and checking account in Banking? The checking account handles payment of most of the regular expenses and receipts of cash from revenues. But the company is not yet using QB invoices or QB bills. I am going to setup both and I want to make sure that the workflow being used is correct so that the transactions can be matched in Banking. Can you please reply with links to how to optimize QB workflow of Invoices and Bills to allow matching with transactions imported into Banking?

RCV · ‎October 11, 2022

Thanks for coming back, JLN25.

If you're using QuickBooks Online (QBO) Advanced, you can set up an invoice workflow and create use custom workflows to automate common tasks such as sending payment reminders, or new invoices to customers, and sending reminders to your team. Also, you can pull in bill details into QuickBooks and then use approvers via the Bill Approval Workflow in QBO. To find out more about workflows, you can read these articles:

For optimizing the QuickBooks workflow of invoices and bills to allow matching with transactions imported into Banking, the program matched the downloaded transaction with the one you already entered. This links them together so you don't get duplicates. All you have to do is make sure the match is correct with the following criteria:

Find a downloaded transaction with the Match option in the Action column.
Note the Date, Description, Payee, and amount spent or received.
Select the downloaded transaction to expand the view.
Review the Matching records found in QuickBooks which is the possible matching transaction you already entered in QuickBooks.
Select the link next to each match to get more details.
Make sure this is the correct match. In particular, review the Deposit to, Payment method, and Bank account fields on forms for the existing transaction in QuickBooks.
If this is the correct match, close the open transaction.
Press Match.

QuickBooks now knows the downloaded transaction is the same one you already entered. It connects the two so there are no duplicates. Here's an article you can refer to for more details about categorizing and matching online bank transactions in QuickBooks Online. You can also create bank rules as this helps automatically categorize transactions for you. Feel free to read this article to learn more about bank rules: How to Set and Use Banking Rules for Downloaded Transactions.

You can also visit our Community Help website which shares helpful articles to read on topics like account management, banking, reports, and more. Just select a subject from the Topics drop-down menu.

If you have any other questions or clarifications, feel free to leave them in the comments below. I'll get back to you as soon as I can. Have a great day ahead.

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Seeking Best Workflow for Accrual Basis Recordkeeping needing cash basis for Tax with linked CC and Checking Acct in Banking as payment methods