Skip to main content
W
Wisco2
February 5, 2025
Question

Accrual Accounting, Contractors and 1099s

  • February 5, 2025
  • 2 replies
  • 0 views

I use QBO for my accounting and have a few contractors that send invoices. Here is my current process

  1. Receive invoice from contractors on 1st of month
  2. Create journal entry in QBO for the 31st of the previous month that debits the expense account and credits Accrued Expenses
  3. Enter the invoice as a Bill in QBO against Accrued Expenses (debiting Accrued Expenses and crediting Accounts Payable behind the scenes)
  4. Pay bill through ACH
  5. Match bank transaction with bill in QBO (debit AP and credit checking)

This way, the expense is tied to the month the service was actually performed (i.e., accrual accounting) and helps with my forecasting.

A few gripes:

  1. QBO does not let you tag journal entries which makes project tracking difficult. I know this is a known issue, but don’t understand why nothing has been done about it.
  2. I think it would be smart for QBO to give a “Service Date” field option on a bill for businesses that use accrual accounting. That would remove the need for a journal entry all together.
  3. When using the 1099 module, QBO does not let you choose a checking account to find payments. Again, going back to my process, my expenses are tied to their month of service (always the last day of the month), however I pay the following month. So, all of my payments for January 2025 are being added to 2024 1099s since that is technically when the expense was recorded (December 2024). My understanding is 1099 is always cash-based accounting (e.g., when money is paid and received). Why not let us pick our checking account to quickly find transactions? I can’t think of a circumstance where only part of payment to a contractor would be 1099 eligible.

Of course, if there is a simpler way to do all of this, I am open to suggestions.

2 replies

J
Jayson_E
February 6, 2025

It's great to see your understanding of accrual accounting principles reflected in your process for managing contractors' invoices in QuickBooks Online (QBO), Wisco2. Specifically, your suggestions about tagging journal entries and including service date fields could significantly enhance your invoicing efficiency.

We can see how these features would be helpful for you and your business. We encourage you to send a feature request directly to our Product Development team.

 

Here's how:

 

  1. Go to the Gear icon menu at the top, then select Feedback.
  2. Enter your comments or product suggestions.
  3. Click Next to submit feedback.

 

You can also visit these articles for more guidance in managing bill payments and creating and filing 1099s in QBO:

 

 

Don't hesitate to visit the Community again if you need more help managing your contractors' invoices, improving the efficiency of the accrual accounting process, or addressing any QuickBooks-related concerns. The Community is always ready to offer guidance and support.

Rainflurry
Rainflurry
February 6, 2025

@Wisco2 

 

"Create journal entry in QBO for the 31st of the previous month that debits the expense account and credits Accrued Expenses"

 

"QBO does not let you tag journal entries which makes project tracking difficult. I know this is a known issue, but don’t understand why nothing has been done about it."

 

Just a thought... There are very few instances of needing to use a journal entry in QBO.  If you want to tag that entry, create a $0 Expense or Bill transaction and list the debit as a positive amount and the credit as a negative amount.  Behind the scenes, that creates a JE that debits the expense account and credits Accrued Expenses but also allows tagging the transaction.

 

"I think it would be smart for QBO to give a “Service Date” field option on a bill for businesses that use accrual accounting. That would remove the need for a journal entry all together."

 

Agreed!

    Terms & ConditionsAccessibility statement