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Jsarg
February 23, 2023
Question

Cash Basis P&L not reporting correctly

  • February 23, 2023
  • 3 replies
  • 0 views

My P&L is not reporting correctly in cash basis. I have a bill entered for January services with a January date. It was paid in December and has a December check date. Accrual basis should show the expense in January and cash basis should show the expense in December. However, the expense is not showing on the December cash basis P&L. It shows in January for both cash and accrual basis. I tested it and changed the bill payment date to February. In that scenario the expense showed up on the January P&L when run on accrual basis and on the February P&L when run on cash basis. 

 

It appears that if I pay a bill prior to the period in which the bill is dated, the cash/accrual reporting defaults to the bill date. But if I pay a bill in a period after the bill date, then the cash/accrual reporting works as it should. I have done a verify, rebuilt my data file twice and I have downloaded and ran the "tool hub". I have also done all updates. I have run a transaction detail report and it reports the same as the P&L. Given most people and many companies file their taxes on cash basis, I feel this feature should work property but I have tested it in multiple data files and I get the same result every time. I find it hard to believe that the number one accounting software does not report cash basis transactions in accordance with tax code. Does anyone have any insight on this issue? 

3 replies

Daniela_A
Daniela_A
February 23, 2023

Thanks for taking time to post your concern here in the community, @Jsarg. Allow me to clarify this matter for you.

 

As far as I can see here on my end, paying bills in advance prior to creating them automatically adjusts to the date when the bill was created. Thus, if you pay a bill in a period after the bill date, then the cash/accrual reporting works as it normally should. That being said, having this option to see exact details you need is indeed a great idea. 

 

I'm taking note of your feedback and passing it along to the appropriate department and team members for consideration in the near future. A suggestion like this helps us determine what enhancements and improvements are needed to make our product more effective and convenient to use. You can also personally send feedback to our product engineers. Here how:

 

  1. Press the Gear icon in the upper right and choose Feedback under profile.
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Feel free to visit this article to see what's new and coming in QuickBooks: Product Updates. It has topics you want to select depending on your needs. 

 

Again, thank you for taking the time to let us know what is important to you as a customer! I'm here for any other questions you may have.

Rainflurry
Rainflurry
February 23, 2023

@Jsarg 

 

I find it hard to believe that the number one accounting software does not report cash basis transactions in accordance with tax code.

 

The reason it doesn't show on your cash basis P&L in December is that a bill payment creates a journal entry that debits A/P and credits your bank account, neither of which hit your P&L.  The expense transaction is dated in January (the bill).  Therefore, this is a prepaid expense (asset) at year-end for cash basis taxpayers.  That is the proper way to record it from a financial accounting perspective.  The only thing that allows you to deduct this from a tax perspective is the "12-month rule" which is tax code. QB is not tax software, it is financial accounting software, and it has some shortcomings as all do.

    B
    BDipp
    April 12, 2025

    I wrote a check for $100 for a business expense in October of 2024. I entered the check as an expense in QB Online and dated the expense October of 2024. That check did not clear our bank account until March of 2025. I prepared a CASH based Profit and Loss report for 2024 for our CPA for our 2024 taxes. That $100 expense is included in the expenses on the cash based Profit and Loss report even though the check did not clear the bank until March of 2025. Can you please explain this?

      FishingForAnswers
      FishingForAnswers
      April 12, 2025

      @BDipp  To my knowledge, there is no method of accounting that is reliant on when transactions clear the bank.

       

      You may be misunderstanding the cash basis method of accounting.

        B
        BDipp
        April 12, 2025

        I will admit I might be completely misunderstanding it. Here is why I thought that way. Because for invoicing, I can invoice a customer for work completed in 2024 and have an invoice date of 2024, but they don’t send payment until 2025.  That invoice would not be included on a cash based profit and loss statement for 2024. It is not included as income until 2025 when it is deposited to the bank account. So I assumed it was the same way with expenses. Am I wrong? 

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