This article contains information about how to set up accounts for cash-basis reports in the following products:
- Microsoft Office Small Business Accounting 2006 with Service Pack 1 (SP1)
- Microsoft Office Accounting Express
- Microsoft Office Accounting Professional
Cash-basis reporting is a way to see only the income that you have collected and the expenses that you have paid. Cash-basis income reporting excludes loans and money that is deposited by company owners. Cash-basis expense reporting excludes the repayment of loans and the purchase of fixed assets. You can submit cash-basis reports to a tax accountant to help prepare your annual business tax return.
You can set up any account that is in the chart of accounts so that the account is displayed in the cash-basis balance sheet and in Profit and Loss reports. When you first set up the company in Small Business Accounting, the Include in cash-basis reports
option is selected for a financial account if the account has one of the following account type attributes:
- Fixed Asset
- Other Asset
- Long-Term Liability
The selection of the Include in cash-basis reports
option is the default setting. Alternatively, you can set accounts from any other account type to be included in the cash-basis reports. The following examples illustrate how to perform this task.
Typically, you pay for items and for expenses with your business credit card, and then you make a payment on the credit card account in the following month. In this scenario, you can set up a new credit card liability account, and then select Include in cash-basis reports
for the account. When you record the credit card charges, the credit card liability account appears on the cash-basis balance sheet. Additionally, the credit card charges for expense appear in the cash-basis Profit and Loss report.
You receive a short-term loan from your bank, for which you set up a new short-term liability account. When you set up the account, you select Include in cash-basis reports
. When you record the deposit of the loan, the short-term liability account appears on the cash-basis balance sheet. If you do not select Include in cash-basis reports
for the new short-term liability account, the deposit appears in the cash-basis Profit and Loss report on the Other cash Income
Historically, you have included inventory as an asset account in your cash-basis balance sheet. To set up a new inventory account in Small Business Accounting to continue to report the inventory account, follow these steps:
- On the Company menu, click New Account.
- In the Select Account Type dialog box, click Inventory asset, and then click OK.
- In the Inventory Asset Account dialog box, enter the account number and the account name, click Include in cash-basis reports, and then click Save and Close.
- Create an inventory item by selecting the new inventory account as the Asset account. To create a new inventory item, follow these steps:
- On the Customers menu, point to New, and then click New Item.
- Select the Inventory option, and then click OK.
Do not select Include in cash-basis reports
for the Cost of Goods Sold account or for the Income account for inventory items. If you select this option in these cases, the values for income or for cost of goods sold may appear in cash-basis reports even though no cash transactions have occurred.Purchases of the inventory items in these cases will appear in the inventory asset account when the bill is created. If the bill is unpaid, the cash-basis balance sheet will display an Unpaid Inventory account that has an amount that is equal to all unpaid bills for this inventory item. When you pay the bill, the Unpaid Inventory account will decrease by the amount of the payment.
The income and the related cost appear only in the Profit and Loss report when the following conditions are true:
- You sell this inventory item.
- You post the payment that you receive from the customer.