Fixing QuickBooks
Cash-Basis Accounts Receivables
This information is directly from Intuit's help web site:
To identify the transactions that are causing the issue, run the following QuickBooks reports:
1. Open Invoices Report
Choose Reports > Customers & Receivables > Open Invoices.
Click the Date drop-down arrow and select the correct date.
Click Modify report, Advanced, and then click As of Report Date.
The payments that appear on the report (included in the CBBS) have been received but not applied to an invoice.
2. Unpaid Bills Report
Choose Reports > Vendors & Payables > Unpaid Bills Detail.
Click the Date drop-down arrow and select the correct date.
Click Modify report, Advanced, and then click As of Report Date.
The bill payment checks that appear on the report (included in the CBBS) have been entered but not applied to a bill.
3. Customer Transaction Detail Report
Each customer who has a non-zero subtotal is impacting your AR balance. To identify customer transactions that are causing an AR balance to show on your CBBS, run the following report:
Choose Reports > Company & Financial > Balance Sheet Standard.
Click Modify Report.
On the Display tab, select Cash for Report Basis.
Delete the From date, keep the To date, and click OK.
To bring up the Transactions by Account report, double-click (QuickZoom) the AR amount.
Click Modify Report.
On the Display tab, delete the From date and keep the To date.
Click Advanced, select the Open Balance / Aging Report Date option, and click OK.
Select Customer in the Total by field.
Click the Filters tab:
In the Filter list, click Account.
Click the Account drop-down arrow and select All Accounts Receivable.
Select No for Include Split Detail.
In the Filter list, select Paid Status, select Open, and then click OK.
(Optional) Click Memorize to save this report to use again.
4. Vendor Transaction Detail Report: each vendor who has a non-zero subtotal is impacting the AP balance. To identify vendor transactions that are causing an AP balance to show on your CBBS, run the following report:
Choose Reports > Company & Financial > Balance Sheet Standard.
Click Modify Report.
On the Display tab, select Cash for Report Basis.
Delete the From date, keep the To date, and click OK.
To bring up the Transactions by Account report, double-click (QuickZoom) the AP amount.
Click Modify Report.
On the Display tab, delete the From date and keep the To date.
Click Advanced, select the Open Balance / Aging Report Date option, and click OK.
Select Customer in the Total by field.
Click the Filters tab:
In the Filter list, click Account.
Click the Account drop-down arrow and select All Accounts Payable.
Select No for Include Split Detail.
In the Filter list, select Paid Status, select Open, and then click OK.
(Optional) Click Memorize to save this report to use again.
When you enter bills and invoices and then report on a cash basis, you are using QuickBooks in a way in which it was not designed to be used. Now that you have reports that show the transactions that are affecting the CBBS, Intuit recommends the following steps to help you resolve your issue:
Important: Backup your company data file before continuing.
Change your Sales Tax preference to Due on receipt of payment, which is the cash basis option, before running the CBBS.
Link transactions in the Receive Payment window (AR).
Link transactions in the Pay Bills window (AP).
Ensure that your service, non-inventory part, and other charge items are linked to income and expense accounts:
Choose Lists > Item List.
Look for any balance sheet accounts (assets, liability or equity) listed in the account column.
Ensure that any items pointing to asset accounts are set up correctly. A few items (e.g., sales tax items, retainer items) should point to asset accounts.
Temporarily delete the transactions you identify as problems:
Critical: Back up your company data file.
Memorize the open transactions and then delete them.
Print your cash basis reports.
Reenter the transactions from the memorized transactions list.
Edit your Journal Entries (JEs): If you have a general journal entry that combines several transactions involving balance sheet accounts, separate the AP or AR portions of the JE into separate JEs.
Move the AR portion to the first line (source) of the JE. Those JEs that are offset to an income or expense account will drop off the report. The JEs that are offset to a Balance Sheet account will remain on the report.
Note: Press Ctrl+Insert to add one line to the JE and press Ctrl+Delete to delete one line from the JE.
To prevent this issue from occurring in the future, Intuit recommends the following:
Discontinue using Inventory items: If you have just a few inventory items, write off the inventory, inactivate the items, and recreate the items as non-inventory parts.
Use only Cash transactions: Although impractical for some QuickBooks users, since AR and AP are appearing on the balance sheet because you are using accrual transactions, enter only cash transactions (e.g., checks, sales receipts) going forward.
If you charge purchases, enter them as credit card charges. QuickBooks records credit card charges as cash basis transactions. Refer to Cash basis profit and loss report includes unpaid credit card charges as expenses for additional information.
Track A/R and A/P in separate data files:
Enter only cash transactions in the main (or cash) data file.
Enter only accrual transactions into the secondary (or accrual) data file.
Delete the open accrual transactions and reenter them as cash transactions when the cash has been paid out or paid in.
Bess Kane, CPA bess@besskanecpa.com
April, 2011
Burlingame - San Mateo - Foster City CPA Since '88
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