End-of-Year Accounting for Daycare Service

[Mike or Penny Novack]

On 1/12/2016 7:55 PM, Terry Morse wrote:
> I'm helping a friend with the accounting for her daycare business. [Note: I am not an accountant.] Some of her customers pay on a monthly basis, some weekly, some daily, and some hourly. One customer receives a government subsidy for daycare and owes a monthly copay plus a variable monthly differential. This customer regularly pays the copay, but is usually in arrears on the differential. Thus, my friend's actual income is much less than she should have been paid. This has complicated the end-of-year accounting for tax purposes.
Terry, the FIRST thing to determine (and you didn't tell us) is how she 
files taxes, "cash basis" or "accrual basis".

The business features of gnucash (invoicing, etc.) are assuming "accrual 
basis". But most small tax payers (and many small businesses) use "cash 
basis".

Accrual basis means the income counts as hers when earned (whether she 
has received it or not). Cash basis means it isn't income for her until 
she has received it. THAT is what counts here. Note that if you/she 
choose to keep the books on a different basis than her taxes are to be 
done, going to have some challenging adjustment issues << doable, but as 
you say, you are not an accountant >>

Your problem is the delay in the "government subsidy" part, yes? BTW, it 
isn't relevant how the different customers' charges are computed 
(monthly, weekly, daily, or hourly rate) but the frequency at which they 
pay is << for example, could be being charged 400/month but be paying 
against that obligation 200/twice a month >>

Michael D Novack