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Established Community Backer ***

Re: Does Your Business Use Cash or Accrual Method Accounting?

Let's not forget, if we use QuickBooks, even if we report as cash or hybrid, we are using an accrual based software.


If we enter Vendor bills or invoice our customers - that is accrual. Pure cash basis eschews bills and invoices , they are disallowed by definition.


Payroll accrues liabilities. Taxes are always due after earned. But paychecks themselves are a cash basis record, as defined by the IRS. When I run payroll on 7/1 I cannot record that as having happened the day before. Conversely when i run payroll on 6/29 i have an expense for full gross wage and a bill essentially for my company share on 6/29 with a due date in July.


I get to use the IRS approved hybrid method of my choice as long as I am consistent. Expenses only occur when my vendors get paid but I claim all income in hand regardless of invoice date.


Should I not report all constructive receipts as income per pure accrual and avoid tax? 


My CPA supports moving prepaid rent to rent income