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intergrp-acct-ma
March 4, 2025
Question

ACCRUED EXPENSES ON CASH BASIS REPORT

  • March 4, 2025
  • 3 replies
  • 0 views

We record our business expenses on accrual basis. 

Example:

rent expense per month = $500

 

We record monthly accrued expense for Jan 2024 to March 2024 and outright expense for April 2024.
Then payment was made on April 10,2024 amounting to $2,000.00.

 

Upon generating the profit and loss in ACCRUAL BASIS at the end of April 2024, the monthly rent expense of $500 from Jan to March 2024 was reflected (including the outright recording of April 2024 rent).

However, when we generated profit and loss in CASH BASIS the same result reflected, the monthly rent expense was also shown.

 

We believe QB should not reflect the monthly accrued rent expense when generating cash basis. Since these expenses were not paid during the period they were incurred, they should not be recognized as expenses on a cash basis report.

3 replies

R
RCV
March 4, 2025

Let's perform some troubleshooting steps to come up with the correct data when running the Profit and Loss report in QuickBooks Online (QBO), intergrp-acct-ma.

 

In a cash basis report, only expenses paid during the specific period should be reflected. The accrued expenses from January to March should not appear since they were not paid during those months. If you're seeing accrued expenses appear on your cash basis report in the program, it could be there's an issue with how transactions are being recorded or how the reporting is being configured.

 

To resolve this, we'll need to ensure the payment of $2,000 on April 10, 2024, is recorded correctly. Then, make sure that the accrued expenses for January to March have not been marked as paid in QBO. Once done, we can adjust the report settings by following the steps below:

 

  1. From the left menu, go to Reports.
  2. Enter Profit and Loss in the search box.
  3. Click the Customize tab.
  4. In the Customize report panel, set the Accounting method to Cash.
  5. Ensure the date range is correct in the Report period field. 
  6. Press Run report. 

 

Then, check if vendor bills or expense entries are linking to payments correctly. Accrued expenses should be linked to the payment made in April to ensure proper cash basis reporting.  If there are missing expense transactions, you can check out this article to troubleshoot the issue: Find the missing income and expense transactions in your Profit and Loss report.

 

For cash basis reporting in QBO, only expenses that have been paid should be reflected. By following these steps, we can ensure that your reports accurately represent your cash transactions and identify any discrepancies in how accrued expenses are handled.

 

You can check out this article to learn more about Cash and Accrual methods: Choose between cash and accrual accounting methods in QuickBooks Online.

 

Moreover, I'll leave this useful guide that you can visit and read if you want to learn about memorizing reports: Memorize reports in QuickBooks Online.

 

If you require additional assistance running your financial reports or any QuickBooks-related concerns, feel free to comment below or visit the Community space. We're here to provide the best guidance and support to help you find the right solution for your every concern, intergrp-acct-ma.

I
intergrp-acct-maAuthor
March 5, 2025

"Then, check if vendor bills or expense entries are linking to payments correctly. Accrued expenses should be linked to the payment made in April to ensure proper cash basis reporting."

 

We record the rent expense and its payment through journal entries.
If this is the recording manner, QBO cannot distinguish the appropriate records to include in
cash basis reporting? 

Does QBO only recognizes and reflect the appropriate transactions under A/R (Revenue-invoice) and A/P (COGS-bills) when generating cash basis report?

Rainflurry
Rainflurry
March 5, 2025

@intergrp-acct-ma 

 

Journal entries show on both cash and accrual basis reports.  It has always been that way.  Many users have requested an option for a checkbox on a JE to "Ignore on cash basis reports", but I don't think that will ever happen.

 

Unless you have a specific reason for using a JE, they should be used only as a last resort.  When you enter a bill in QB, behind the scenes, a JE is created that debits whatever account is listed on the bill (asset, liability, equity, income, expense) and credits A/P.  That way, QB can correctly remove unpaid bills from cash basis reports.  If you use a JE, the entry will show on both cash and accrual reports.   

    Rainflurry
    Rainflurry
    March 4, 2025

    @intergrp-acct-ma 

     

    "We believe QB should not reflect the monthly accrued rent expense when generating cash basis."

     

    QBO is not great at producing cash vs. accrual reports, and even so, you need to know how QBO generates them.  QB uses bills and invoices to differentiate cash vs. accrual transactions.  Accrual basis reports are based on the bill/invoice date, and cash basis reports are based on the bill paid/invoice paid date.  If you use any other form (journal entry, $0 bill/invoice, etc.), it bypasses QB's ability to differentiate between cash and accrual transactions.  

     

    In your example, you would need to create four separate $500 bills - one each for Jan. through Apr. and then pay them in April.  That will produce accurate cash vs. accrual expense reporting using the cash and accrual radio buttons.  However, until paid, that offsets the expenses to A/P, not accrued expenses.  You can move them to accrued expenses with a JE but that creates other issues.    

      I
      intergrp-acct-maAuthor
      March 5, 2025

      "If you use any other form (journal entry, $0 bill/invoice, etc.), it bypasses QB's ability to differentiate between cash and accrual transactions."

       

      We record the business expenses such as this rent expense through journal entry.
      So this means QBO cannot differentiate if accrual or cash basis if recordings are all through journal
      entries?

      C
      CharmieH
      March 5, 2025

      Once transactions are tracked through journal entries, QuickBooks is unable to accurately identify which records to incorporate in cash-based reporting, intergrp-acct-ma.


      As Rainflurry noted, methods like journal entries impair QuickBook's capability to distinguish between cash and accrual transactions.


      Moving forward, you may consider tracking your transactions using the invoice and bill function. This way, the program will properly determine entries based on the accounting method used      .

       

      Additionally, you may refer to this resource if you want to set a schedule and email information for your memorized reports in QBO: Schedule and Email.

       

      Please leave a comment below if you need anything else about running your financial reporting. We're here to help you. Have a great day!

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