Cash vs. ACCRUAL system of accounting (which do I use as a bookkeeper?)
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- čas přidán 14. 03. 2023
- Cash vs. ACCRUAL system of accounting (which do I use as a bookkeeper?). This includes a QuickBooks Online tutorial on how to switch reports between cash and accrual, and also how to change the default in your QBO settings. Business owners can choose if they want to use accrual (which shows outstanding invoices/bills) or cash (which shows just the literal cash in your bank account).
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Just saw a fb add from intuit with you in it!! Congrats on the recognition!!
Thanks for always explaining a variety of topics Morgan! I started Bookkeeper Launch last year --no clients yet, but determined to keep going🙂
Glad you are enjoying Morgan's channel and hope you find your first client soon!
Krista (FinePoints Admin)
Thank you, Morgan and Team! This explains it so well!
I'm glad you found this helpful!
Krista (FinePoints Admin)
@FinePointsBookkeeping Thank you, Krista!
Thank you so much!
Thanks!
Thank you for explaining the difference between accrual and cash. I do my husbands bookkeeping, and we use the cash method because it helps with paying into our personal account vs accrual. I do keep track of his invoices as they come in. Hopefully, in the future we’ll be in a financial place to use accrual.
Hi Anastasia! Thanks for sharing your experience with cash vs accrual with your own business.
Krista (FinePoints Admin)
Thank you for this explanation. I definitely use the cash system in my business. I don't want to think I have money in my account and I don't. You never now what can happen. I think the only annoyance is at the end of the year when you want a Dec billing to be received in Dec but its recorded in January. 🤷🏾♀ Besides the one rule you mentioned seems this is a personal preference? Although I can see for A/P purposes you would want to note what is owed to ensure you have the money.
Thank you for sharing your most recent video on Cash vs. Accrual.
As you know, I have a small business in Bookkeeping and Accounting. It is also a home based business. I am currently using the cash basis in my business. In some cases, I believe I am using the accrual basis when money is owed to me. I hope I understand what you were saying in the video about the cash and accrual basis, because I am currently using both of them. Please let me know if this is possible. Again, I thank you for sharing your most recent video concerning this.
Hi Rickey! Yes, it is possible to use both but it's easier if you stick to one.
Krista (FinePoints Admin)
@@FinePointsBookkeeping Thank you.
Thanks a lot of
do these methods affect A/P and A/R I'm trying g to figure out if we do cash method, willing still have accounts payable in my balance sheet
👏🏼👏🏼👏🏼
Sorry for the question but I’m a new to this. Wouldn’t a business want to know exactly how much money is available at any given time. Therefore the “cash” system is more accurate. I’m just trying to understand which system would be best for a small business.
Yes, true, cash is more straightforward. With the accrual system you can better predict what is upcoming. Is there a payment coming in 20 days? Accrual will tell you that. Either is actually fine (and you can change your mind later).
I’d say rather than wondering which one is best for a small business, it depends on how that business is conducted. Like if you deal in invoicing a lot (either/or for purchasing or for income) rather than point-of-sale charges, you might look into accrual for a more accurate picture of your available funds. If you have your bills on autopay, you buy your supplies and services point-of-sale, and you don’t invoice your clients/customers but have them pay at point-of-sale, you may not have any use for accrual.
Yes but a going concern company will use an accrual system . Cash basis is suitable for micro businesses
Cash basis doesn’t track A/R and A/P meaning no track of invoices kind off
@@philip-markosrah2454 I agree with this. My business is cash basis and I do not track A/R in QBO. I track it on another platform and as far as A/R i just pay when the bill comes. No invoicing or bills logged in QBO
what if my client worked in December.. but didn't get paid until January.. for tax purposes does it matter that he got paid Jan... 😊 he is an s corp and he pays himself like a w2 employee
We are using cash now.
That's great!
Good
Thanks for watching!
You may have explained this elsewhere but for small business attorney firms should you use cash or accrual accounting. I have heard the arguments for both sides but am still uncertain. Especially if you are trying to use QBO only. Can you enter items like acct receivable and payable and still use cash accounting?
Hi Arthur! I'm not really sure of the answer, but here is a video Morgan made on bookkeeping for attorneys (czcams.com/video/7N3Z7nAFtfI/video.html) maybe it will help answer your question.
Krista (FinePoints Admin)
what if my client worked in December.. but didn't get paid until January.. for tax purposes does it matter that he got paid Jan... 😊 he is an s corp and he pays himself like a w2 employee