Accounting…you either love it or it makes your head spin! As a business owner, it is a necessary ‘evil’. If you aren’t in charge of the bookkeeping yourself, you may not realize there are two methods of accounting – cash basis and accrual basis.
What’s the difference?
The main difference between cash basis and accrual basis accounting lies in the timing. When is revenue recorded and reported as income?
- Cash basis recognizes revenue when the payment is received.
- Accrual basis recognizes revenue when it is earned, i.e., invoiced or billed.
To illustrate, consider the scenario where a customer purchases an item from your pro shop and puts that amount on their account to be paid later.
- Using cash basis accounting the revenue is recorded immediately.
- Using accrual basis accounting the revenue is not recorded until the payment on account is received.
Jackrabbit uses cash basis accounting throughout the software. With the latest enhancement, you can easily adjust your Paid Fees report to accommodate accrual basis accounting. It’s possible this is your accountant’s dream come true!
What has changed in Jackrabbit?
One of our most popular revenue reports, Paid Fees, has new Search Criteria. In addition to searching by Date Paid, you can also search by Fee Date, i.e., when the fee was posted. Using this new search criteria will help you make adjustments in two scenarios:
- payments are received after the cut-off date for a revenue period, e.g., month end or year end.
- when you accept prepayments.
It doesn’t matter if you use QuickBooks or hire an accountant, the improvements to the Paid Fees report make it more powerful than ever!
Pro-tip: When using the Paid Fees report, choose to Show Detail in the Display Settings at the bottom on the criteria selection page. Using the detail view gives you more information on what fee was paid by which family and when.
How do you get the information you need?
Whether you are doing your monthly reconciliation in QuickBooks, or you are preparing for your annual taxes, you are focused on a particular revenue period. Any payments made before or after that period should be adjusted accordingly. Remember, with accrual basis accounting, the focus is on when the fees were invoiced or posted to your families’ accounts.
Payments received after the cut-off date:
Payments received before fees are posted (prepayments):
Don’t forget…any reports in Jackrabbit that you use on a regular basis can be Favorited for quick access. After you experience the power of the new criteria in the Paid Fees report, we have no doubt you will ‘heart’ this one!