On 11/3/2019 6:22 PM, David Cousens wrote:
When you are on a cash basis then you only really record in your accounts
the income received and expenses incurred at the time of handing over of the
cash so there is really no alternative to maintaining a separate record of
occupancy and arrears etc to keep the taxman off your back. Main trick will
be as you haven't recorded unreceived rent as income you don't write it off
as an expense. Taxation authorities generally won't allow that if you are
eligible to and elect to use cash basis accounting.
This is an example of the need for "adjusting" entries if using accrual
for the business features but are keeping the books on a cash basis.
A/R is an asset account. What you would want for adjustment is a contra
asset account, say with a name like "not received at YE". Then among
your YE adjusting entries (depreciation, for example) you would have one
debiting income and crediting this account by the total of A/R. You can
now run the P&L* and Balance Sheet* correct for cash basis. After the YE
report (as the first transaction of the new year) a transaction could
reverse this.
BUT --- I am not an accountant. People needing cash basis books for
reporting purposes but are using accrual for the business features
really should consult a professional.
Michael D Novack
* Income will not be inflated by the A/R and neither will total assets.
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