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W
waterngo
November 6, 2023
Question

How to log non-cash expenses and payments against liabilities to enable accurate cash basis reports as a firm that operates on accrual basis

  • November 6, 2023
  • 1 reply
  • 0 views

Hello!

 

We manage our business on an accrual basis, but we have a donor that requires cash basis reports. However, when we use the "cash" basis for a report for that donor, it is not accurate. For example, depreciation expenses are still included when they are added via journal entry. Likewise, while we prepay rent for a year and then recognize the non-cash expense each month via JE, the cash report includes only the non-cash accruals in the period, not the cash payments. Finally, when we sign a contract and only pay 10% of the value in the period, the entire contract value is recognized as an expense in the "cash" report.

 

I would imagine we are simply recording these entries incorrectly or inadequately for QuickBooks Online to know how and when to recognize a value as a cash-basis or accrual-basis value to be included in the report.  Any and all help appreciated on the scenarios noted above:

 

1) Depreciation journal entries

2) Prepayments vs. monthly JEs to recognize usage of service for that period

3) Contracts signed vs. payments made against contract

 

Many thanks!

1 reply

J
Jelayca V
November 6, 2023

Thank you for reaching out your concern with us, @waterngo. I appreciate your message and understand the challenges you're facing in aligning your accrual-based business with a donor's request for Cash Basis reports. Rest assured that I'm here to guide you through the process and shed light on some key considerations.

 

It's crucial to recognize that accrual and cash accounting methods report income and expenses differently. When switching accounting methods, accounts and balances in reports may vary. To address this, you can temporarily adjust your company's accounting method for specific customer reports.

 

Here's how you can do it:

 

  1. Click the Gear icon and select Account and settings.
  2. Go to the Advanced tab.
  3. Select the Edit in the Accounting section, 
  4. Choose the "Cash" as the Accounting method.
  5. Hit Save. 

 

This adjustment allows you to generate reports with the desired accounting method for the specified customer. However, be mindful of potential differences in account balances due to the change in reporting methods.

 

Additionally, ensure that the dates used for transactions are accurate, as QuickBooks relies heavily on transaction dates when generating reports.

 

We acknowledge that there is room for improvement in QuickBooks reports. We encourage you to share your insights and suggestions through the Feedback feature in QuickBooks Online (QBO). Your input is valuable in enhancing user experience.

 

For accurate depreciation reporting, utilize QBO's built-in depreciation feature. Refer to our article for detailed guidance: Depreciate assets in QuickBooks Online

 

To manage prepayments and monthly service usage, categorize initial payments separately and use distinct journal entries, you may check out on this article for detailed information: Record a retainer or deposit 

 

While these articles provide valuable guidance, please remember that individual business circumstances may vary. For precise steps tailored to your specific needs, we recommend consulting with your accountant.

 

Don't hesitate to reach out using the reply button below if you need further assistance with reports in QBO. The Community is always available for you.

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