[GNC] Cash flow basis (vs accrual basis) reporting

[David Cousens]

Todd,

The major difference between cash and accrual accounting is to do with
the timing of when you record events in your book, i.e. the dates at
which you record the transaction. The primary aim in accrual accounting
is so that any expenses and the income earned from incurring those
expenses are recorded in the same accounting period irrespective of
when the money/cash actually changes hands. An invoice is usually
issued when the work earning the income is done/completed and the
income is recorded in your books at the date of issue of the invoice.
That is one of the objectives of the invoice and the accounts
receivable system, it provides recording of income at the time of issue
of the invoice, not when payment of the invoice is received. When you
issue the invoice is under your control not GnuCash's.

With expenses in accrual accounting, they will not necessarily be
recorded as expenses at the time at which you pay for the goods but
might, for example, be recorded as an asset "inventory" on purchase and
then the expense will be recorded against the inventory at the time you
do the work for a particular job, i.e. when the expense is incurred in
earning income.  Again a purpose of the accounts payable is to maintain
that separation in timing of the recording of the actual incurring of
the expense and making the payment for it.

In cash accounting the taxation authority does not require you to
maintain that relationship between income and expenses in your books
and the income and expenses are generally recorded in your books at the
time payment is made or received rather than when the work earning
income or incurring expense is actually performed.

It is not what GnuCash does with the data internally that is different,
just the dates/timing at which you make entries, create invoices etc
into your books that are the difference. The specific rules of course
depend on the legislation in your jurisdiction, usually the applicable
taxation legislation.  While GnuCash is set up to support accrual
accounting with the business features, it can equally be used for cash
accounting but then some of functions the business features are then
not necessarily going to work as you would expect them to with accrual
accounting, e.g. control of ageing of receivables, control of some
aspects of cash flow etc.

David Cousens



On Tue, 2025-03-11 at 09:27 -0600, Todd Gould wrote:
> My apologies for the confusing wording.  I do mean cash basis.
> 
> Sadly, we do also need to invoice, so.... the question remains
> 
> On Tue, Mar 11, 2025 at 9:15 AM Michael or Penny Novack via gnucash-
> user <
> gnucash-user at gnucash.org> wrote:
> 
> > On 3/10/2025 7:03 PM, Todd Gould wrote:
> > > I have noticed various older historic discussions regarding the
> > > lack of
> > the
> > > ability to perform Cash Basis reporting - especially for small
> > > business
> > > purposes.
> > > 
> > > Is this feature on the development radar anywhere?  How can we
> > > get it
> > > prioritized more highly please?
> > > 
> > a) You CAN use "cash basis" even for small business/organizations.
> > The
> > only PITA is unable to use invoicing (except by work arounds). If
> > your
> > small business does not do much invoicing, the work around not too
> > cumbersome.
> > 
> > b) But you said "cash FLOW basis". Gnucash can do cash flow
> > reporting
> > but that has nothing to do with cash FLOW.
> > 
> > Michael D Novack
> > 
> > 
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