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Reverse accruals made for prepaid expenses or unearned income on a cash basis balance sheet

QuickBooks does not reverse any accruals you make for prepaid expenses or unearned income on the cash basis. It also does not reverse any A/R or A/P amounts that offset to balance sheet accounts other than Sales Tax Payable. In order to create a true cash basis Balance Sheet, you may need to enter journal entries to reverse accruals for prepaid income and expenses.


Solution Description

Using the totals from the filtered “Transactions by Account” report create a journal entry to adjust the balance in A/R and A/P. Enter reversing entries as of the first day of the following reporting period.

You must not use Accounts Receivable or Accounts Payable on the top line of these journal entries when the offset to AR or AP involves one or more income or expense accounts. If you do, the transaction will be considered “open” and therefore it will not change the cash basis reports. Instead, use the workaround of putting the A/R account on any line other than the first. QuickBooks will see this as a cash basis transaction. Also, you must enter a customer name in the name field on the A/R line of the journal entry, and you must use a vendor name on the A/P line. To keep things simple, create separate names for these adjustments, for example, “Accounting Adjustments – C” for adjustments to AR and”Accounting Adjustments – V” for adjustments to AP).


KB ID# HOW12935
10/25/2016 6:40:15 AM
QYPPRDQBKSWS03 9138 Pro 2017 81f453