1. If I enter vendors bills as checks instead of including them in the Accounts Payable line item of the statement- Does it mean they go into the expenses portion of the Net income (loss)? 2. At the point of time of the Statement of cash Flows there is a vendor bill that is unpaid and on hold due to legal dispute that is underway but still not resolved - How do I account for it in the Statement of cash Flows
@Anonymous So you are saying that the unpaid bill should be included/recorded in both the expenses (in the Net Income (loss)) and the A/P accounts? In the A/P should it be then as a positive effect on the cash situation (increase)?
Correct - a net increase in AP means you paid less to vendors - which is a positive change in the cash-on-hand. This is the cash-flow statement presentation that is most commonly used with accrual accounting (called 'indirect') and QB follows this system.
The alternate is 'direct' presentation - which converts a set of accrual accounts into what you would get from a 'cash based' accounting. QB doesn't offer that CF format for accrual accounting - but if you use 'cash basis' accounting in QB you get that result by default.
Could you please explain the part which converts a set of accrual accounts into what you would get from a 'cash based' accounting I don't fully understand it
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