Accounts Receivable payments for taxes

[Alex Aycinena]

> ---------- Forwarded message ----------
> From: Derek Atkins <warlord at MIT.EDU>
> To: Richard Geddes <richardcgeddes at gmail.com>
> Cc: gnucash-user at gnucash.org
> Date: Fri, 22 Mar 2013 10:45:01 -0400
> Subject: Re: Accounts Receivable payments for taxes
> Hi,
>
> Richard Geddes <richardcgeddes at gmail.com> writes:
>
>> Hello,
>>
>> Gnucash 2.4.10, Linux.
>>
>> I've been using the A/R to invoice and generate aging reports without
>> issues.
>>

<snip>

>>
>> Is there a way to get A/R to generate an entry into Income:Sales:xxxx
>> when the payment is made or a Tax Report that only considers payments
>> made on invoices?
>
> No.  Using the Business Features necessarily creates an Accrual-based
> accounting.  You need to manually convert from Accrual to Cash-based.
>
>> Thanks
>> Richard
>
>> Please remember to CC this list on all your replies.
>> You can do this by using Reply-To-List or Reply-All.
>
> -derek
>

Derek is right in-so-far as the accrual nature of the income numbers
reported in Gnucash is concerned but that doesn't mean you have to
file your taxes on an accrual basis nor that the conversion from
accrual- to cash-basis has to be done outside the system.

You can think of the use of the AR features in Gnucash as an
'operational convenience' rather than a wholesale conversion of your
books from cash-basis to accrual-basis. What you can do is to make an
adjusting entry every year-end followed by a reversing entry at the
beginning of the new year. Create an account structure such as the
following:

Assets:
  Accounts Receivable - Adjusted  <-- new parent account for existing
AR account; type Asset; placeholder account
    Accounts Receivable - Adjustment  <-- new sub account; type Asset;
this is where you place one side of the adjustment
    Accounts Receivable              <-- this is your existing AR
account tied to the billing system; type AR; new parent account

Income:
  Income - Adjusted  <-- new parent account for existing Sales
accounts; type Income; placeholder account
    Income - Adjustment   <-- new sub account; type Income; this is
where you place the other side of the adjustment
    Income:Sales:xxxx  <-- existing Sales accounts
    etc.

Then make two entries a year, as follows:

On Dec 31 (or whatever date is your year-end):

Dr  Income - Adjustment account for whatever the balance of you
Account Receivable account is
  Cr  Accounts Receivable - Adjustment  for the same amount

Then on Jan 1 of the following year (i.e., one day later), reverse it:

Dr  Accounts Receivable - Adjustment  for the same amount
  Cr  Income - Adjustment account for the same amount

These entries reduce your income amount by the amount of your AR which
is how much you have billed but not yet collected, thereby getting you
back to a cash basis.

Be sure to include the Income - Adjustment account in your Tax Report
so that it reports an income total on a cash basis.

Also, the first year you do this, you have to handle a beginning of
the year cut-off issue. If this is the first year you are using
Gnucash or if you had no AR balance at the end of last year, you are
all set. If you had an AR balance last year, then what you do this
year will depend on what you did last year. You need to make sure that
if you reported income last year that you collected this year, you
don't want to include it again this year. But if you didn't, then you
need to make the reversing entry at the beginning of this reporting
year so that your income for this year is properly on a cash basis.

Alex