Thanks Bernd.
I really don't like it either, but like I said, I have had more than one
accountant tell me this, and my current one prefers all his service
business clients use it.
Luke
On Wed, 13 Apr 2011, Bernd Plagge wrote:
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If you think it through cash accounting basically means that you can't have any
open invoices - at least not at yearend.
What I would do is adjust the $500 invoice to "$300 - installment 1". You
received the money and hence you can close the invoice.
Then you issue a second invoice for "$200 - installment 2" in January.
If a customer doesn't pay at all - well you had fun but you can't issue an
invoice.
I don't know about the US but I'm also in service business but never did any
cash accounting. It is neither typical nor useful because customers just don't
pay cash.
Over here every accountant understands it but the situation may be different in
the US.
Regards,
Bernd
On Wed, 13 Apr 2011 04:52:11 -0400 (EDT)
Luke <[email protected]> wrote:
On Wed, 13 Apr, Bernd Plagge wrote:
ok, if you run on a cash basis then you're right.
Sales are only realized once you receive the money.
Then, of course, you can only post costs which actually occurred i.e.
what has been paid for.
Maybe I fail to see your problem ...
Hmm.:) My problem may be that I was misinterpreting the instructions for
dealing with this situation.
So let me see if I have this right.
In 2010, a $500 invoice is posted. $300 of it is paid before the end of
the year, and $200 will be paid in 2011.
I need to record that $200 as being paid in 2010, thus closing the
invoice.
I then create another 2010 invoice, only for the $200 portion of the first
one.
When the customer pays the remainder on the first invoice, I apply it to
the second instead.
If that's correct, I only have one remaining question.
Where do I receive the first (artificial) $200 payment to? Normally it
should debit a cash account.
I'm guessing I have to use some clearing accounts.
Thanks
Luke
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