Why is it that a payment made in April will show up on reports in May, Cash basis, if the invoice is dated in May? Why wouldn't it show up in April, the month of payment? I know AFTER the invoice date it will post it to the correct month.
It does show up in negative Accounts Receivable on the Balance Sheet in April.
Yes, I agree with Carol! The A/R is not the problem as it is true, the customer would have a credit or negative A/R. The problem is that ON THE P&L, the payment shows up in May since the invoice was dated May, even though the payment was made in April! This is NOT true CASH basis accounting. When I print a Cash Basis P&L, it is incorrect!
Personally, I love the Cash basis reporting option for clients who have a hard time understanding accrual accounting.
Yes, I agree with Carol! The A/R is not the problem as it is true, the customer would have a credit or negative A/R. The problem is that ON THE P&L, the payment shows up in May since the invoice was dated May, even though the payment was made in April! This is NOT true CASH basis accounting. When I print a Cash Basis P&L, it is incorrect! It is only ONE tenant each month who pays the wrong amount and often overpays a bit of the next month and I have to search for the error each month!
You are right, this is not "true cash basis accounting", but that is because the posting of the "payment" ONLY affects the balance sheet accounts. If you run a P&L on cash basis, there is no transaction to any income account in April. The balance sheet printed on cash basis IS correct as demonstrated with Corae's answer.
If the company is "truely" on cash basis accounting, then there would be NO "Accounts receivable" or "Accounts payable" and a prepayment would be posted as a sale at the time of receipt. In your case, (a tenant who "prepays"), if you file your income tax returns on cash basis, I would do a journal entry (and reverse to the current year) to clear any A/R credits at year end, (Credit income account, Debit A/R and reverse in the current year). Or you could do this monthly if you want, using two memorized Journal Entries. Alternately, you could switch to accrual accounting, since you need to track the tenants in A/R.
Prepays are not "true cash basis accounting", but that is because the posting of the "payment" ONLY affects the balance sheet accounts. If you run a P&L on cash basis, there is no transaction to any income account in April. The balance sheet printed on cash basis IS correct as demonstrated with Corae's answer.
If the company is "truely" on cash basis accounting, then there would be NO "Accounts receivable" or "Accounts payable" and a prepayment would be posted as a sale at the time of receipt (no "prepayment").
Thanks Gayle,
The company does track A/R, however the VERY intune owner who has been doing the accounting on this commercial property for decades on journal paper by hand also wants to see Cash Basis reports.
Seems like a simple request for QB as the money was received under "Receive Payments" with a date! The amount the tenant overpays is random, adding to the issue! ;)
I suppose there is little chance this is something they are working on to resolve..?
As long as you are tracking A/R and you are posting a payment to a future invoice, you are going to experience this problem.
A simple fix would be to pre-date the invoice for this one tenant to match the payment date - since you are not running reports on the accrual basis, you will get accurate cash basis information on the P&L.
If you do want to run both cash and accrual basis reports that are correct, then you will need to enter a JE to debit A/R and credit Income in April and reverse the JE in May as Gayle suggested.
Why are you using Invoices for this at all?
If someone walks in and pays the rent in advance, use a Sales Receipt.
This is a COMMERCIAL building with MANY tenants. Invoices are created at the beginning of each month so that A/R can be tracked as EACH tenant is different. Most are somewhat behind, some pay on time and this one pays the wrong amount (albeit DIFFERENT amounts) each month as she can't seem to remember what her rent is each month.
It would NOT make sense to create a cash receipt for her overage each month. The accounting would be INSANE, however QB SHOULD be able to track the ACTUAL cash paid in each month whether it is overpaid or not, it was still the cash that received in each month.
This is us, not QB: " however QB SHOULD be able to track the ACTUAL cash paid in each month whether it is overpaid or not, it was still the cash that received in each month."
Because you need to be handling the funds appropriately.
If you receive more than is due for an invoice or receive the payment early, the amount sits in AR as a customer credit. That is why you don't see this as income or liability, in that it is negative AR.
Now some people don't mind this and let it sit there until they are ready to apply it to the next invoice.
If you would rather handle this correctly, then here is how to handle an overpayment:
Create an Other Chargy type of item for Customer Prepayment, just like Help explains. Link it to an Other Current Liability account.
Use this item on an invoice, for the amount overpaid, and then Receive the customer Payment against all the invoices.
Now, the amount in the Liability account is the overpayment. When you are ready to apply it to the next invoice, you can create a Credit memo using the same item, for this customer, with the amount that was overpaid. Apply this credit to the next invoice amount due.
You manage the liability account by creating a custom transaction detail report filtered for the liability account, total by Customer name. Here is how you manage how much is on hand for which customers and how much has yet to be applied and which customers are at $0.
This is all up to us, the QB user, to do the work correctly per the accounting process.
Not as concerned with the Balance Sheet accounts as you are right, they DO have a credit due to the overpayment. The issue is no matter how much time is spent making other accounts on this one tenant who overpays, her CASH basis P&L will never be correct.
If her rent is $1560 each month and she pays $1600 each month, creating a $40 credit each month, then the P&L should read $1600 for each month she paid that amount. If the $40 is credited to the next month's invoice either through the Recieve Payment window, or held as a credit and then credited later, or creating a liability account, etc., QB still tracks only $1560 on a cash P&L and pushes the $40 into the next month. This $40 of course then continues to add up month after month and of course, she does not pay exactly $40 over each. It is always different. I am training the Property Manager to track this all in QB and the owner is VERY astute and would love to see how much she actually received from tenants each month. It is FINE if people pay late, but it is just a shame QB can't track it on a cash basis if someone overpays a bit towards the next month.
Hopefully if anyone else is having this issue, it will be something Intuit addresses in a future update.
This is not a QB "problem" - you would have the same issues doing the work by HAND! It's all in the accounting processes.
This makes no sense: "Not as concerned with the Balance Sheet accounts as you are right, they DO have a credit due to the overpayment."
You have to respect that it takes three reports to see the full financial picture:
I don't know what it means by "not as concerned" because no one report gives you enough information. The Balance Sheet accounts are equally as important as the P&L from a management perspective.
All we are discussing here is the accounting process. If the company wants to see this as Income, but not as Rent Income until the rent is due, then you can use fund accounting, the same as is used by Nonprofit organizations, to consider the prepayment as Restricted Income until the rent is actually due. Then, you rebalance Restricted and Unrestricted equity, to show you have released the restriction.
Again, none of this has anything to do with QB. We are using the tool.
