Quicken Budget Report using Accrual Basis

Yes, it can be done in Q2006. Not matter what anybody says, Quicken is essentially a double entry system that can accommodate most any accounting entry you want to make.

Probably most people maintain their accounts on a cash basis, meaning that no accounting entry is made until cash moves. Quicken encourages you to do your accounting on a "semi-accrual" basis by providing accounts styled as "credit accounts", a form of liability account, and by supporting these accounts with automatic downloads. If you enter each and every credit card charge in the related credit card account you're performing accrual accounting with respect to these accounts. That is, you're creating expenses and assets *before* cash moves, i.e., before you pay the monthly credit card statement.

To expand this to full accrual basis you need to create "asset" and "liability" accounts as needed. I, for example, have a receivable accounts to capture my wife's bills for her independent contractor teaching and for various "prepaid" expenses such as annual home owner's insurance. In the same vein I create liability accounts that capture true liabilities before I end up funding them.

You only need to create a Budget Report that pulls from *all* the relevant accounts the create a true accrual budget and a true accrual actual.

Tom Young

I agree with Tom but my approach is a bit different (I think). I post the accrual every bi-weekly paycheck to expense and accrual account. When the actual bill comes in, I pay it (cash,check, or credit card account) and post the offset (dr) to the accrual account. If the expense is higher than my accrual, I post the difference to expense. If it is lower, I reverse part of the first expense/accrued posting. I run my budget report against my expense account which starts out as the same as my accrual and then becomes the actual expense when the bill arrives.

Mr. Jan

Thanks. My main concern is dealing with prepayments sent to me for a job that occurs in the following fiscal year. I am trying to get the prepayments to appear in the same year as the job. Similar to your suggestion, I set up a Receivables Account and created invoices for these prepayments. Now I've made the invoice date the same as the job date, and my Quicken budget report shows the prepayments in the same year as the job. Problem solved, except for two quirky things:

1. I had to refund one of the prepayments. The refund occured in the same year as the prepayments. When I do an Itemized Category report for the prepayment year on cash basis, the refund amount is added to my other received amounts (not subtracted).
2. When I do an Itemized Category report for the job year on cash basis, the prepayments disappear (as they should), but they are still included in the Total Amount, with the error in the refund amount described in point 1. I suspect I should avoid using cash basis reports if I am using the Business features in Quicken.

Please expand. In every double entry system I've ever used, you *must* assign an entry to two accounts - and that doesn't mean two bank accounts. Quicken will allow you to enter transactions all day long without enforcing this rule.

I looked up "Business features" in my Quicken 2007 Deluxe help file and read the following : "If you purchased Quicken Home & Business, you can track personal and business accounts in the same Quicken file." So, it sounds like you're using Quicken 2006 Home & Business?

I don't have Quicken H&B so I can't directly help you do what you want to do, but I can discuss the accounting and how I'd work your situation in Quicken 2007 Deluxe. (Briefly reading the help page that deals with "Business features" it sounds like Q H&B enhances "ordinary" Quicken, such as adding subsidiary ledgers that make it easier to track certain detail like Accounts Receivable and Accounts Payable and also provides support for the generation of Invoices, and so on. Not to worry, it's all double entry accounting.)

If you're sending out invoices for prepayments on jobs to be performed at a later date the essential accounting is a debit (increase) in your "accounts receivable" account and a credit (also an increase) in a

If you refund a client's prepayment before you perform the job the accounting entry is a debit (decrease) in the liability account ("prepayments received" or "deferred revenue") and a credit (decrease) to the cash account. Again, no P&L effect to this entry so it will never show up on an accrual basis P&L.

When you actually earn the money, i.e., perform the work, the accounting entry is a debit (decrease) to your liability account and a credit (increase) to whatever revenue account you're using, like "Job Revenue." This is the only accounting entry that will show up in your P&L, as it should, and *when* it shows up in your P&L is entirely dependent on when you make the accounting entry.

Using only the accounts and categories I've mentioned above, I'd set this up in Quicken 2007 Deluxe by inserting budget amounts in the Job Revenue category by month, and then creating a budget report that pulled its information from the accounts receivable and deferred revenue accounts.

Tom Young

Quicken gives you "Flexibility" in this regard. If you enter a check in your bank account and don't assign a category (Quicken-speak for an account that gets reflected in the P&L statement, not the Balance Sheet) Quicken assigns a category called "uncategorized. There's a warning when you do this, but you can turn this warning off. The category "uncategorized" shows up as a line item in an "Income/Expense by Category" report and as a reduction in "Overall Total" (i.e., net worth) in a "Net Worth" or "Account Balances" report.

If you write a check in your bank account and charge it back into the same bank account the entry properly doesn't show up in a "Income/ Expense by Category" report (no "category" has been affected) but does show up as a reduction in "Overall Total" (i.e., net worth) in a "Net Worth" or "Account Balances" report. In this instance you've in effect made a direct entry to equity. Debits always equal credits, the books always balance.

Tom Young

Tom Young

I am using Quicken 2006 XG. I made a copy of my Quicken file with the Business Centre inactive, to try your method. Now when I deposit a prepayment that will be carried over to the next year, I enter the Quicken category as a transfer to the liability account: "Prepayments Received". When the job is done, I make an entry decreasing "Prepayments Received" to zero, using the category I've assigned to that income stream. So far, my reports look OK. Have I done what you intended?

Poifect!

I'm not sure what the effect of having Business Centre inactive is but I'm going to go out on a limb and say that if elements of Business Centre are important to you (generation of invoices? AR tracking? Something else?) you most likely can get the same results with Business Centre active. Quicken is flexible enough in its reporting that you should be able to prepare budgets and generate reports on a full accrual basis. Probably the most difficult part of the exercise is setting up the reports correctly since the accounting - as you can see - is pretty darn simple.

Tom Young

This is a lot simpler than using the Business Centre. Thanks.