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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.
Cash-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.
Accrual-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.
Data 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 .
Effect 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