Accounting Type - StandardSimplified Setup

The General Tab Entities requires the selection of an accounting type when you add an entity. The following types exist: cash-based accounting and accrual-based accounting.

The General Tab Company requires the selection of an accounting type when you add a company. The following types exist: cash-based accounting and accrual-based accounting.

ClosedCash-Based Accounting

In cash-based accounting, costs are expensed when goods or services are paid for; that is, expenses are recognized when the bill is paid. Revenues are recognized when a receipt is added; that is, when funds have been received for a billing. Inventory, accounts payable, and accounts receivable records do not exist in a cash-based system, and therefore, are not reflected on a balance sheet.

ClosedAccrual-Based Accounting

In accrual-based accounting, you record an expense when you receive goods or services, regardless of when you pay for them. Revenues are recorded when you provide goods or services, regardless of when you receive payment for them. Inventory, accounts payable, and accounts receivable records are maintained. Using this method, you record income on the books when it is earned, and you record expenses when they are incurred. This method results in the accurate matching of income earned in one quarter against expenses incurred in the same quarter. Period activity is reflected on a balance sheet, which provides you with a clearer picture of the financial status of your business. That clearer picture can be used to make management decisions.

ClosedData Entry Shortcut

If you set up both cash-based and accrual-based books for the same entitycompany, you can set up a data entry short cut that creates entries automatically.

To set up the shortcut select an alternate entitycompany ID on the General TabGeneral Tab Company. For example, if you are setting up both cash-based and accrual-based books for an entitya company you want to enter the alternate entitycompany ID on both of the cash-based and accrual-based tabs. Confirm that the IDs you select are valid for posting.

To use the shortcut, select the option Create detail lines for Alt EntityCompany on the Add/Edit Journal Entry form. As you begin to add a line on the journal entry, the system enters a second line item with identical values for the alternate entitycompany automatically. The additional line item includes the alternate entitycompany ID, the same account number, and the same amount as the prior line item. You can edit the automatically generated line item. These automatic entries are validated for the entire journal entry when you click Save.

You can also use this shortcut when you are adding beginning balances.

ClosedEffect on Property/Company Setup and Posting Rules

During property set up (Standard Setup), you select a default entity on the General Tab. The entity has an associated accounting type: Cash or Accrual. For Accrual, the system displays additional fields at the bottom of the Property General Tab. For either type, the system generates posting rules, and you must complete the set up of these rules by selecting account numbers. Without posting rules, the system fails to function properly. Refer to Effect of Accounting Type for more information.

During company set up (Simplified Setup), you select a default company on the General Tab. The company has an associated accounting type: Cash or Accrual. For Accrual, the system displays additional fields at the bottom of the General Tab. For either type, the system generates posting rules, and you must complete the set up of these rules by selecting account numbers. Without posting rules, the system fails to function properly. Refer to Effect of Accounting Type for more information.

See Also

Entities Overview