Creating Quickbooks Bill Shows Liability Account as Paid

"Will" wrote

In a true cash basis, there will be no liabilities or payables.

Maybe change the reporting to accrual basis to see what the reports look like then.

I understand that in a cash basis there are no payables, but there are also no liabilities? How can that be? Surely a credit card account has to be set up in the system as a liability, as would a loan, and there must be a way to record transactions in those liability accounts, otherwise your balance sheet will be completely wrong. Imagine someone who takes a $100K loan and doesn't record it. That can't be right.

But the problem I am seeing is that the liability account itself is showing as paid up. It's not a report view.

"Will" wrote

Under a pure cash basis of accounting, the only balance sheet asset is cash, there are no liabilities and teh remainder is equity.

If cash basis doesn't reflect the true picture, change the basis. Accrual, or most likely a modified accrual basis is going to be appropriate.

Something is probably set-up wrong then.

Run *slowly* through the set-up process.

yes...in the "cash basis" ...the transaction is "falling" to the p&l imeditaly (sp?) rather than "lingering" on the bal sheet until paid....in cash accounting...you are supposed to make the transaction entry into quickbooks right after you actually have paid the bill...in acrual accounting...you can wait until the end of the day, week, or month and then enter the transaction....accrual accounting is much better, as it matched up the transactions better with dates and timing.....it allow you to better match up expenses with the correct periods in which they occur....in the cash accounting...the expenses are posted (to the p&l) the day or moment you pay them...hope this helps !!...

For expenses what you describe is how I saw it.

For long term liabilities, I am perplexed. How can any method of accounting say that if I take a $5M loan payable over 10 years that I now have assets of $5M, equity of $5M, and no liabilities? Kind of scary if this is what the cash basis requires.

will...it is...

why do you want cash basis?

"Will" wrote

If the cash basis of accounting is not providing a good picture of your financial picture, then consider changing to accrual or some form of modified accrual (book the noticeable assets and liabilities and expense the generally recurring stuff).

That way you aren't accruing back and forth for the phone bill (the base rate is paid in advance and the toll charges are paid in arrears) and the like. Book asset purchases, financing, and the expected assets and liabilities to the balance sheet and expense the rest.

Why are you saying there is no liability? As soon as there is a cash transaction you show the other side of the entry. If money is received from a customer you show the sale and if money is received from a loan you show the loan.