Why non-cash related general journal entry transactions are showing on Statement of Cash Flows

Thank you @MadelynC . 

I appreciate your quick and insightful response!

Regards,

Ruth

You're always welcome, @Ruth36.

We're glad to know that my colleague MadelynC is able to provide helpful information about why non-cash related general journal entry transactions involving retained earnings and capital accounts are showing up on Statement of Cash Flows. 

Feel free to comment back if you need extra help with journal entries, financial reports, or QuickBooks. The Community is always happy to assist. Have a great rest of the week and stay healthy!

Hi Madelyn,

I have a similar problem and maybe you can help. I spent a couple hours on the phone with Quickbooks and they are unable to solve it. 

I read over your blog post. And using that the issue seems Quickbooks uses the indirect method for cashflows but does not adjust for non-cash income items. 

So the quesiton is how do I record non-cash income.

In my example, I am doing a real estate purchase. The seller has pre-collected rents so they pay it back to me when settling up at the end. No cash is received and instead I pay them a little less at closing. 

I recorded the rent payment as a Other Asset. Then at closing I moved it to Income. My expectation was the Quickbooks would report this transaction in the Cashflow Statement under Operating activities and it would show this rent in Net Income and then deduct it because it came from Other Asset and was a non-cash transaction. It does not do this. It just shows it in Net Income and thus overstates cash. 

How should I record this transaction? It needs to be in Income so taxes are correct but not in cash so bank balances are correct. 

Thanks for any help you can provide!

Hi Madelyn,

I have a similar problem and maybe you can help. I spent a couple hours on the phone with Quickbooks and they are unable to solve it. 

I read over your blog post. And using that the issue seems Quickbooks uses the indirect method for cashflows but does not adjust for non-cash income items. 

So the quesiton is how do I record non-cash income.

In my example, I am doing a real estate purchase. The seller has pre-collected rents so they pay it back to me when settling up at the end. No cash is received and instead I pay them a little less at closing. 

I recorded the rent payment as a Other Asset. Then at closing I moved it to Income. My expectation was the Quickbooks would report this transaction in the Cashflow Statement under Operating activities and it would show this rent in Net Income and then deduct it because it came from Other Asset and was a non-cash transaction. It does not do this. It just shows it in Net Income and thus overstates cash. 

How should I record this transaction? It needs to be in Income so taxes are correct but not in cash so bank balances are correct. 

Thanks for any help you can provide!

I appreciate what you've done so far, haley. I can provide additional details about tracking prepayments and non-cash income in QuickBooks Online (QBO).

In QBO, vendor prepayments can be tracked as assets however, it will not show in the Operating activities section in the Cash flow statements. Thus, it can be seen under the Investing activities. Here's an article for further details: Statement of cash flows: What it is and how to read it.

On the other hand, you can use the journal entry to track the non-cash income. While we're unable to provide which account to use, I recommend consulting with your accountant. They'll be able to show you in detail how to record this correctly for your books to ensure its accuracy. If you’re not affiliated with one, you can check our ProAdvisor page and we’ll help you find there.

Furthermore, you can visit this article for future reference in handling your accounts so they always match your bank statement: Reconcile an account in QuickBooks Online.

Don't hesitate to tap the Reply button if you have additional queries about tracking non-cash income and vendor prepayments. I'm always here to assist you.

@haleydance 

"I recorded the rent payment as a Other Asset. Then at closing I moved it to Income.

Am I understanding correctly that you are trying to apply Prepaid Rent as a reduction in the purchase price of the real estate?  If that's the case, then there's no income in that situation.  You just want to apply the prepaid rent asset to the real estate fixed asset account by making a journal entry: debit the real estate fixed asset account and credit your prepaid rent expense asset account.  Let me know if I'm missing something here.