Setting Cash vs Accrual Method

[R. Victor Klassen]

When I used Quickbooks it would allow me to select “Cash” as an option for reports, with “Accrual” as the default.

Presumably, under the hood it was figuring out how to do the right thing.   It was fairly heavy-handed about making sure you marked payments with the invoice/bill to which they belonged - which would be required for the ability to switch back and forth at reporting time.



On Feb 16, 2014, at 10:38 AM, Mike or Penny Novack <stepbystepfarm at mtdata.com> wrote:

> R. Victor Klassen wrote:
> 
>> Yes, we also came from Quickbooks, and were using cash-based.   [In Canada there are tax benefits to using cashed based if you are farming].   Fortunately for us, we have relatively few transactions that cross the year boundary and therefore the difference is small. 
> I am having more than a little difficulty understanding the SENSE in which Quickbooks is "accrual" when the essential differences between "cash" and "accrual" are the transactions entered and the dates associated with them. You still have to enter the date of the transaction, yes? You still decide what transactions you choose to enter? << I haven't used QuickBooks since 2006 >>
> 
> Example  (and I will be using  one from farming for the reason given above)
> 
> The hobby farmer down the road needs some help getting a field prepared. So on May 7th you go over there with your big tractor and plow up his field and on the 8th you come back with the harrow and then on the 9th you mail him a bill. On Jun 4th you receive a check from him for the full amount.
> 
> Accrual -- You enter a transaction crediting income "outside work" and debiting "receivables". with a date of May 9th. Later you enter a transaction debiting "cash" and crediting "receivables" with a date of June 4th. If you run monthly reports of income will show up in the May report, not the June report. When you did the work and when you sent the bill important; when the bill was paid less so.
> 
> Cash --- You enter a transaction debiting "cash" and crediting "outside work" dated June 4th. If you run monthly reports of income will show up in the June report, not the May report. When you did the work and mailed the bill unimportant; only when you got paid matters.
> 
> Michael D Novack