- posted 10 years ago
I have an interesting situation with a S-Corporate return prepared by an
accountant. The company keeps its books in Quickbooks, and they do their
accounting and report taxes on a cash basis. The accountant is taking the
position that Quickbooks' cash-basis balance sheet incorrectly shows entries
for Accounts Receivable and Accounts Payable - which are strictly speaking
Accrual concepts. So he is preparing the return as follows:
1) He takes the Accrual balance sheet from Quickbooks and enters that in
2) He takes the cash basis income statement from Quickbooks and enters that
in the income part of the return
3) He then reconciles the accrual to cash conversion of net income with a
line in Schedule M-1
While it might be a purer way to do things, it does make it harder to verify
the return, and requires some extra work for the company.
My questions are:
1) Does anyone see a problem with preparing the return this way?
2) Is there a strong reason to not just use the Quickbooks' cash-basis
balance sheet, and just allow it to include the Accounts Payable and
Accounts Receivable entries? It would certainly make it easier to read and
verify the return against the books. And from what I understand the IRS
doesn't pay much attention to Schedule L in any case, so probably the
cash-basis balance sheet would pass.