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FrontAccounting forum → Setup → Defining Accrual or cash basis accounting method
Is there a way to define the type of accounting method to be used with FA?. I already have the environment running, and it looks it is in accrual method. In that case, is it possible to change the method?
Thank you.
You can choose whichever method by passing the payment voucher or creating the invoice on the appropriate date.
Which features in FA do it automatically that affects the reporting for each method?
Can you give an easier explanation?
In my case, I provide 30 days to customers. Particularly, Invoices issued in December are paid in January (on the following year). What do you mean by creating the invoice and payment accordingly? In my case the invoice is issued in a different year than the payment voucher.
Better yet, which report can give me the total revenue as only paid invoices?
In accrual method, only when payment is received is the invoice bookable. That is you do not consider it income till you get paid or the customer has agreed to pay and you accept that as the point of income. FA does not bother about when you choose to record the payment voucher and when you wish to invoice the sale. This may be useful for computing tax on sales that have been paid for.
For apmuthu:
Yes, you have defined the method correctly. Some other accounting software allow you to choose the type of accounting and the reports are generated according to the chosen method. And you are correct, reports are needed for tax purposes. To obtain the information, at this time, I have to run several reports and then filter information in order to achieve my need.
Just as a warning in the United States you can change your books from cash to accrual but not the other way around. I would be surprised if it's the only Country too.
Cash is accounted when you get the payment
Accrual when it is invoiced or billed
Example
$100000 sales in in 2017, 80000 paid 20000 in accounts receivable
Accrual based taxes on 100000 of income
Cash based taxes on 80000
If you want to use the cash basis accounting method with FA, all you need to do is change the "Accounts Receivables" account group from an Asset to an Income account. The Profit and Loss and Balance Sheet reports and tools will then report on the cash basis. Its really that simple.
This should suffice for most simple businesses. If you offer customer financing or prepayment, it gets a little more complex, because you may want to split interest from sales because of reporting requirements, and have to deal with negative A/R. For example, customer A prepays $100 without an order and customer B makes a $100 order but hasn't paid yet. Is your income -100, zero or $100 using cash basis accounting? Good question on an accountant exam.
Caveat: this technique is broken if you use dimensions until FA is updated with a pull request I made.
If you use Accounts Payable, you would have to change it from a Liability to an Expense account (I haven't tested this).
Note: you can change the account group of "Accounts Receivable" back and forth with no harm done if you want to switch between cash to accrual basis.
@joe / @itronics: any progress on @braathwaate's commit and way forward here?
How you setup your accountancy is all about what you need in accordance with your accountant. Either cash or accrual based.
FA will follow you in these approaches. When using prepayments the accountancy is maybe a little different, but in my opinion there are no further requirements needed in FA to accomplish this.
Joe
FrontAccounting forum → Setup → Defining Accrual or cash basis accounting method
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