GL Accounts

[Nith Valley Organics]

In our jurisdiction, we are permitted to use cash accounting (and there are tax advantages to doing so) for our line of business.

I still use the business features, putting through invoices even when payment is immediate (I’d like a “post & pay” shortcut, but I don’t know whether anyone else would…).

Having invoices gives me a nice easy way to track sales tax where appropriate, and lets me search for how much of X we sold to whomever.
Business features are useful in spite of the fact that I have to hack around the accrual accounting system at the end of the year.

> On Dec 8, 2017, at 7:57 PM, DaveC49 <davidcousens at bigpond.com> wrote:
> 
> Hi Maf,
> 
> Just a slight clarification on what accrual accounting means. 
> 
> The GAAP contains certain principles about when income is considered to be
> earned and when expenses are considered to be incurred and when they are to
> be recognized/recorded in the accounts. These are not necessarily coincident
> in time with the receipt of payments for income or the payment by you for an
> expenditure for reasons which may be unrelated to you offering or accepting
> payment under terms of credit.
> 
> In accrual accounting income is for example considered to be earned at the
> time when you perform the work that entitles you to receive that income even
> though you may not actually receive the payment until some time later (for
> example after submitting a report). 
> 
> Similarly you may incur an expenditure in accrual accounting terms at the
> time you enter into an agreement to purchase something, not necessarily when
> you actually make the payment. This can of course complicate the accounting
> and can be important in the tax accounting for many business. This is what
> defines accrual accounting.
> 
> Most tax jurisdictions allow use of a simplified form of accounting (usually
> under a specified turnover threshold and under other specified conditions)
> where you record in your accounts income at the time you receive the payment
> and expenditure at the time you make the payment. This is usually referred
> to as accounting on a cash basis or Cash Accounting.
> 
> The difference is in the timing of the recording of an event, e.g. the
> issuing of an invoice, and is not necessarily related to the use of A/R or
> A/P per se. 
> 
> These (A/R, A/P) relate specifically to a business providing credit to its
> customers under certain terms it specifies or accepting credit from its
> suppliers under the terms they specify and they can be used both with
> Accrual or Cash accounting. 
> 
> 
> David
> 
> 
> 
> -----
> David Cousens
> --
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