Cash vs. Accrual Accounting

I searched through these forums, and surprisingly couldn't find a thread pertaining to this issue. As some of you may know, I have been working on integrating RMS store ops with Quickbooks2005 for the past month. I have almost worked out all of the kinks. One problem remains...

We do our accounting on a cash basis instead of accrual. For those that don't know, the main difference is when sales tax is paid on customer invoices. In accrual base accounting, sales tax is payable as soon as an invoice is created, where in cash basis sales tax is payable only after an invoice is paid. There are many advantages of cash base accounting for a business like ours, but the most important is cash flow.

At any rate, it appears to me that when RMS exports data to Quickbooks, it credits the 'Sales tax payable' account when customer invoices are created, thus it exports in accrual base. My question is simple, is there any way to change this so that RMS exports an entry to 'Sales tax payable' only after a customer has paid that invoice?

I certainly hope so as converting our entire system to accrual base would be difficult to say the least.

Thank you in advance for any insight or advice regarding this matter.

Reply to
Jesse
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Jesse,

IANAA, but are _you_ really sure that you can use cash basis? Most things I've read, say that generally, if you have inventory, you _must_ use the accrual method. Have you discussed this with your CPA or accountant?

A CPA _cannot_ express an opinion for a cash basis business, so if you intend to apply for a loan, you may have issues.

If you do more than a million dollars in sales, you _must_ use accrual.

Reply to
Jeff

Yes, I'm certain that we can use cash, we have done so for over 5 years now. Our CPA was the one who suggested it in the first place. We don't yet gross over a million... but we might within the next few years. Perhaps I should just convert to accrual now (or rather at the end of this year) and save myself the hassle later on.

So I take it your answer is 'no, rms cannot export cash basis accounting information'. Thx for the input.

"Jeff" wrote:

Reply to
Jesse

Jesse,

RMS doesn't know much about accounting and what you are speaking about is an accounting issue. RMS will post to whatever GL account you tell it to, the paying of the sales tax is up to your accounting method/program. RMS is just telling the accounting program how much something should be.

FWIW, I just dropped your subject line into Google and read the first 8-10 articles. Every one of them says that if you have inventory to be re-sold, you _must_ use accrual. Also if you are C corporation.

You also cannot change back and forth between cash and accrual methods either. The IRS gets a little testy about that.

Again, IANAA or a CPA, but you might want to consider a change in CPA's ;-) or at minimum, get a second opinion!

Reply to
Jeff

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