[GNC] Rental property - How to account for delinquent rents?

[Michael or Penny Novack]

On 11/3/2019 6:22 PM, David Cousens wrote:
> When you are on a cash  basis then you only really record in your accounts
> the income received and expenses incurred at the time of handing over of the
> cash  so there is really no alternative to maintaining a separate record of
> occupancy and arrears etc  to keep the taxman off your back. Main trick will
> be as you haven't recorded unreceived rent as income you don't write it off
> as an expense. Taxation authorities generally won't allow that if you are
> eligible to and elect to use cash basis accounting.
>
This is an example of the need for "adjusting" entries if using accrual 
for the business features but are keeping the books on a cash basis.

A/R is an asset account. What you would want for adjustment is a contra 
asset account, say with a name like "not received at YE". Then among 
your YE adjusting entries (depreciation, for example) you would have one 
debiting income and crediting this account by the total of A/R. You can 
now run the P&L* and Balance Sheet* correct for cash basis. After the YE 
report (as the first transaction of the new year) a transaction could 
reverse this.

BUT --- I am not an accountant. People needing cash basis books for 
reporting purposes but are using accrual for the business features 
really should consult a professional.

Michael D Novack

* Income will not be inflated by the A/R and neither will total assets.