Cash vs. Accrual Reporting in QuickBooks Online


By Amanda Karen | CrunchSum



In QuickBooks Online you can either choose to use cash as your reporting basis or accural. Each method is discussed in more detail below including the impact that each has on your financial reporting. The main differences lie in when sales and purchases are recorded.

    Cash

    Income is reported at the point in time that you receive payments (when cash is received) from your customers/clients. Expenses are reported at the point in time that you pay bills (when cash is paid out).

      Accrual

      Income is reported as soon as your customer/client is billed. Expenses are reported at the point in time that you receive the bill (incurred). In a nutshell, under the accural method you record transactions when they occur, rather than when money exchanges hands.

        Cash vs. Accrual and Taxes

          The main way that the reporting method you choose for your business finances impacts your business is when it comes to taxes.

            Expenses

            Under the cash method if you incur expenses during the end of 2012, but don’t end up paying them until early 2013, you will not be able to use these expenses to reduce your 2012 taxable income. Under the accrual method, you are able to include all incurred expenses (not just those that have actually been paid) that took place during 2012, to reduce your 2012 taxable income.

              Income

              When using the cash method, if you issue several invoices at the end of 2012, but do not receive payment for these invoices until early 2013, this income will be recorded on your 2013 tax return. If using the accrual method all issued invoices at the end of 2012 would be included as part of 2012’s taxable income.

                *The materials on this website are provided for informational purposes only and do not constitute legal advice. Please confirm with your CPA which reporting basis you should use.


                Which reporting method do you use for your business and why?


                CrunchSum provides web-based bookkeeping and QuickBooks support services to web and technology companies.


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                2 thoughts on “Cash vs. Accrual Reporting in QuickBooks Online

                1. Amanda Karen,
                  Does Quickbooks Online service cost money, or is it a free service after buying the Quickbooks software?

                  I have friends that run a nonprofit business. Would Quickbooks online be something they need to use?

                  • QuickBooks Online offers 3 separate plans: Simple Start, Essentials, and Plus. You do need to pay for each plan. QuickBooks Online is certainly a viable option for non-profits. Most non-profit clients use QuickBooks Online Plus because it offers the following features: budgeting, unlimited report-only user access, and class tracking capabilities. You can learn more about each plan option here. If you have any further questions please contact: info@crunchsum.com. Thanks for the comment, Zeke!

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