Reports, (the heart of darkness)

[John Whitmore]

On Wed, Dec 07, 2016 at 05:09:19PM -0500, Aaron Laws wrote:
> On Wed, Dec 7, 2016 at 4:51 PM, John Whitmore <arigead at gmail.com> wrote:
> 
> > OK Now I think I have a sensible question. I'm looking at the "Income
> > Statement" report which looked good, but I've found a problem. Once I file
> > an
> > Invoice in GnuCash it shows up as "Income" I'd have said that it's only
> > "Income" when the invoice is actually paid.
> >
> > That's distorting my income as it looks like I've got money I don't
> > actually
> > have as yet. Is this the way it would be expected to work? I'm not an
> > accountant so I could have the wrong impression of things.
> >
> 
> It looks like you have stumbled upon the difference between accrual basis
> and cash basis accounting. Generally accepted accounting principles dictate
> the use of the former: When you *earn* revenue, it should be reflected in
> your books, not when you get the money (see
> https://en.wikipedia.org/wiki/Revenue_recognition). The United Statesian
> Internal Revenue Service allows me to use either when doing business taxes,
> though, understandably, they're picky about changing between the two
> systems.
> 
> This is usually done by crediting an "accounts receivable" account to
> represent that someone owes you money:
> 
> dr: assets:AR:consulting          $250
> cr:           revenue:consulting            $250
> 
> When you actually get the money, record it as such:
> 
> dr: assets:chequing          $250
> cr:            assets:AR:consulting       $250
> 
> You should speak to your accountant or tax adviser about whether to use
> cash or accrual basis accounting and which might be best for you from a tax
> perspctive.
> 
> I'm not an accountant.

Thanks a million for that. I am using "accounts receivable" so I think that's
all good and I want to pay tax on money that I've been paid not on what I've
theoretically earned. People aren't paying invoices as fast as I'd like. If I
have to wait then so can revenue ;-)

Having said that can I switch GnuCash between accrual and cash based? In my
opinion I'm cash based.