Switching to cash accrual for taxes

@Anonymous 

That's just this year. Next year it may be the other way around. You can't just change the method any time to avoid tax. There's a process

You're certainly welcome, @Anonymous. 

As previously mentioned, you may still want to consider reaching out to your accountant to ensure that this is best setup. Also, as @Malcolm Ziman referenced, there is a process to this and it is important to ensure that you have the optimum setup for this year and in the future. Additionally, there can be rules associated with accounting methods in order to ensure compliance, such as if your business uses merchandise for example.  

The Community always has your back, so please feel free to drop by anytime. Cheering you to continued success. 

My sales tax is on accrual but I think I want to change it to cash basis.  Do I understand correctly that I have already paid sales tax to NYS if I chose accrual for sales tax even if I didn't get paid on the invoice.  Also what if I never get paid.

Hi there, @ericange.

Let me share additional clarification on how cash and accrual accounting methods affect sales tax.

If you file your taxes as accrual-based, these are already counted as income of the invoice date. But if you file taxes as cash-based, then those payments are counted as income on the date received.  Thus, if you invoiced your customer in October (with accrual basis), you owe sales tax payment that month, and it is due in the next month (November). If you already paid your sales tax liability last month, then yes, it's already paid. 

To answer your second question, you can write off an uncollectible invoice by creating a bad debt item and a credit note. This way, you can apply it to your invoice to remove the chargeback and ensure your accounts receivable and net income are up-to-date.

Here's how to create a bad debt item:

1. Click Gear, then click Products and Services.
2. Click New. Then, click Non-inventory.
3. Enter "Bad debts" in the Name field.
4. Select your bad debts accounts under the Income account drop-down.
5. Click Save and close.

Then, create a credit memo for the bad debt:

1. Click the Create (+) icon.
2. Click Credit Memo. Select the appropriate customer.
3. Click Bad debts under Products/Service. Enter the amount you want to write off.
4. In the Message displayed on statement box, enter “Bad Debt.”
5. Click Save and Close.

Once done, apply the credit memo to your invoice by going to Create (+), then Receive Payment. Select the customer, invoice, and credit memo you created. Then, hit Save and close.

To check that the uncollectible receivable now appears under the Bad Debts expense account, you may run the  Profit and Loss report. But as recommended by DavidSC, you may consult your accountant which accounting method to use to make sure the setup is correct and your books are done right. 

If you have any follow up questions, I'm only a post away. Take care and have a great day.

Thanks!!  I have another question.

I have a business credit card and recently the payments are being made to the credit card from a personal account that is not in my chart of accounts.  After I reconcile the credit card, Quickbooks asks if I want to make a payment and I'll say yes and tell quickbooks to pay from the business checking but now its being paid out of personal checking which isn't in my chart of accounts.  What should I do?

Good morning, @RGAGENCY.

I'm here to clarify some information for you. 

You can set up and add your credit card in the Chart of Accounts so it can be in your QuickBooks account.

Here's how to add an account to the Chart of Accounts:

1. Select the Accounting tab and then Chart of Accounts.
2. Click on New, then choose the Account Type.
3. Find the Detail Type that fits your account or the transactions you want to track.
4. Give your new account a name. You can use the info under the detail type to add a name that fits. You can also add a description.
5. For the As Of date, tell QuickBooks when you want your account to start. Then add the Balance in the account as of the date you choose.
6. Pick Save and Close.

Here is also a detailed article about creating subaccounts in the Chart of Accounts as well: Create Subaccounts in the Chart of Accounts in QuickBooks Online

Please let me know if the step above does the trick. Thank you for reaching out to the Community. Happy Thursday!

Hi Kendra,

I'm sorry but this doesn't answer my question at all.  I want to know how do i categorize the payment to me credit card when its made from a personal checking account that isn't tracked in quickbooks.

Usually I would make the payment and categorize "Chase Checking" (which I track in quickbooks) but in this case the payment was made with a personal checking account that isn't tracked in quickbooks.

Hi, RGAGENCY.

Since you made a payment using your personal account into your CC, the Personal account must be created in QB. You can either have this as a Bank account or Owner's Equity.

Step 1: Record the business expense you paid for with personal funds:

1. Select the + New button.
2. Select Check.
3. Select a bank account to use to reimburse the personal funds.
4. In the category column, select the partner's equity or owner's equity.
5. Enter the amount to reimburse.
6. Select Save and close or Save and new.

Once you decide to pay back the personal account you can create a check or expense through the same account (Bank or Equity). You can refer to this article for other recommended steps (proceed to Step 2): Pay for business expenses with personal funds.

Also, you might find this video tutorial interesting about recording business expenses: Record Business Expenses: Paying with Owner Funds.

If you require more information about this process, please let me know. I'd be more than willing to lend you a hand.

Do you know if there is a way to run a profit/loss statement on one of my bank accounts in quickbooks.  I only want the transactions that were recorded in one of my bank accounts to be included.  I try to run the report and I purposely uncheck the bank account I don't want included but it still includes it.

I'll help with your Profit and Loss report, RGAGENCY.

For now, we're unable to directly filter Profit and Loss report by bank account. However, you can use the Location tracking feature to provide essentially the same information.

This will allow you to set up a location for each bank account. Then, assign each transaction you enter to one of those location/bank accounts. 

Follow these steps on how you can enable the location tracking:

1. Click the Gear icon and select Account and Settings.
2. Proceed to the Advanced tab.
3. Click Categories, then check the box for Track Locations.
4. Click Save, then select Done.

Once activated, set up the bank accounts as location. Here's how:

1. Go back to the Gear icon and select All Lists.
2. Click Locations, then click New.
3. In the Location Information dialog, enter the bank account name in the Name field.
4. Select Save and close.

After assigning locations to your transactions, you can hen run the Profit and Loss by Location or Profit and Loss by Location Detail reports. You can also check out these articles for more details:

• Run a Profit and Loss report in QuickBooks Online
• Customize reports in QuickBooks Online 
• Memorize reports 

Keep me posted or add another reply below if you need anything else.

Hi,

I work for a CPA firm & we have access to our clients settings, so we will change this often over to cash & save it, HOWEVER, we are finding that not all accounts will actually "save" over to cash instead of accrual.

So what gives? Is there a glitch in the system when used this way?

Or is there another way we should be changing this? I dont get why sometimes it works & sometimes it doesnt & sometimes it says its saved, you run the report (just the simple p&l) and it does not give you the cash, it defaults back to accrual???? 

Its extremely frustrating. 

Hey there, Mia-2020. 

Thanks for dropping by the Community this evening. I'm happy to help. Below are the steps on how to change between Cash and Accrual methods on reports.

1. Go to Reports.
2. Select a report.
3. Select Cash or Accrual under Accounting method (you can also select the Customize button to open the Customize Report window and change the setting in the General section).
4. Select Run report.

You can find these steps as well as information pertaining to the best time to use them, in the following article.

• Choose between cash and accrual accounting methods in reports.

If these are the same steps you normally use, then I would recommend reaching out to our support team, not only can they guide you on completing the steps listed above but they can go through each one, click-by-click in a screen share setting. This will allow them to determine why the change isn't saving. To reach them, you can follow these steps:

1. Sign in to your QuickBooks Online company.
2. Go to Help (?).
3. Select Contact Us.
4. Enter your concern, then select Let's talk.
5. Choose a way to connect with us:
   • Start a chat with a support expert.
   • Get a callback from the next available expert.

Thank you for your time and have a lovely Wednesday evening.