Reports, (the heart of darkness)

[John Whitmore]

Thanks a million David for taking the time to spell that out. I've now got
that done. As everybody says on here "I'm not an accountant" so I do need
simple instructions. Your's were perfect and I've now got that done.

Think we can put this thread to bed, but maybe there's room for a wee appendix
in the user guide.


On Thu, Dec 08, 2016 at 06:06:15PM -0800, DaveC49 wrote:
> John,
> 
> The adjustmnet at the end of year is not to A/R but t oyour Income. When you
> raise an invoice the transaction is (ignoring any VAT/GST/
> 
> A/R                     Debit       3000
> Income(Revenue)                           Credit    3000
> 
> i.e. You have recorded  the income at the time of posting the invoice not
> the time you receive the cash
> 
> If you have not received this income at the end of the tax year your income
> reported for tax purposes needs to be adjusted down in the current year by
> that amount and adjusted up in thefollowing year. I would be inclined to use
> an equity account for recording the adjustment to income. One way to do this
> transparently would be to have a sub account of your top level income
> account along with a sub account of the toplevel income which is the target 
> of the secondsplit in the invoice transaction above.E.G
> 
> Income:                                                    (top level
> placeholeraccount)
> Income:Consulting                                     ( accoint you record
> income from your invoices)
> Income:AdjustmentAccrualtoCash                ( account for recording EoY
> accrual to cash adjustments)
> 
> Equity:AdjustmentsAccrualToCash                 (accountfor recording the
> second ssplit of the adjustment)
> 
> The end of year adjustmentthen becomes ( assuming just the above invoice was
> outstanding at EoY) 
> 
> Income:AdjustmentAccrualtoCash                Debit       3000
> Equity:AdjustmentsAccrualToCash                                    Credit
> 3000
> 
> Your Income placeholder wouldthen record your taxable income. You would
> thenclose your books for the year, transferring your income andexpenses to
> something like an Equity:RetainedEarnings account ( see the guide for
> details of closing  books at EoY which would have as its balance your
> taxable income forthe yearjust  finishing). Your Income and Expense accounts
> should then have 0 balances for the new financil year and you would then
> make the following transaction to resore the adjustment in the new year:
> 
> Equity:AdjustmentsccrualToCash            Debit   3000
> Income:AdjustmentAccrualtoCash                                 Credit 3000
> 
> The Equity:AdjustmentsccrualToCash  balance should then be 0 after
> completing the adjustments and the Income account will have a staring
> balance as abovefor the new year.
> 
> If you have VAT/GST taxes in your jurisdiction you would also need to make
> similar correspondig adjustments to the VAT liability accounts.
> 
> Note you may also need to adjust your expense accounts for any A/P balances
> which are recorded but you have not paid at the EoY if you use the business
> vendor system for recording payments to suppliers.
> 
> Anything above is generic and your local tax rules may require a different
> treatment. If you are in doubt consult an accountant.
> 
> David Cousens
> 
> 
> 
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