Can't select accounting basis in reports

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Thanks for the examples @Brucanna / @Tut. Found them both helpful to understand.

Trying to separate actionable changes to the cash/accrual calculation that @lubos could consider, from the rest of the discussion.

From an accounting point of view, I’d assume that getting the calculation correct is most important, and the user interface to control that comes second (but is still important to consider).

With Tut’s example, it sounds like Billable Time that has not yet been invoiced (Billable time - movement account) should affect reports under the accrual basis. Is that correct?

Based on lubos’ comment, this is not currently how it works, as he wrote that the program currently only considers invoices. So there may be a change required in that calculation to also consider the value of uninvoiced Billable Time, irrespective of any user interface changes being discussed.

With Brucanna’s example, my understanding is that most or all of those are adjustments entered manually into the journal. So until they are entered, there is no way for the program to differentiate from a programming / calculation point-of-view, because it doesn’t know about the need for an adjustment.

The difference between cash vs accrual here is entirely within the realm of the accountant’s head, until it gets entered into Manager. At that point, it’s been locked in as an adjustment, because it now exists as a journal entry record.

If that journal entry uses accounts like Billable time - movement or Accounts receivable or Accounts payable, perhaps Manager should treat that entry differently based on the accounting basis in use.

Which brings me back to lubos’ comment, that the calculation currently only considers invoices. Perhaps a change is required there.

I think it’s important to consider what is subjective vs what must not be changed. The user interface, naming of items, etc is important; but subjective … the most important thing would be to ensure the calculation is correct so that reports show accurate values.

If the developer believes that only invoices affect the calculation difference in a cash/accrual basis, then that is probably correct from the program’s point of view. If it is not correct from an accounting point of view, that’s a problem to be fixed.

It just feels like the elephant in the room is being ignored.

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To be clear, the program currently does not display billable time movement if you have it set for cash basis accounting. But if you change to accrual accounting, that account is displayed. This is because under cash basis accounting, the billable time is not income until it has not only been invoiced but also received.

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44

Long, long ago, before computers, when accounting was done using paper and T ledgers, an accounting method was chosen and the accepted procedural process was then followed, when preparing the accounts, to present them as per the accounting method that was selected.

When paper based systems were used, sales invoices could be issued without recording a transaction in the accounting ledger. If you were using the cash method of accounting you would only enter the transaction into the ledger when payment was received.

However, with the introduction of computers, sales invoices are recorded at the same time they are issued to the customer. So, now we have a dilemma, we are using the cash method but we have violated this method by entering an accrual transaction.

To overcome this, computer based systems allow the user to enter all transactions without regard to the accounting method, and then the system gives the user the option to select the accounting method basis for the way that reports are presented. If the accounting package is set up correctly, it will exclude all the open accrual transactions from a report when cash basis is selected.

Therefore, the system should not assume anything in relation to the accounting method being used by reference to the transaction data that has been entered. The system should always give the option, to the user, to select an accounting method basis for report presentation (the summary screen is fundamentally a report).

Manager does give this choice, but not until an invoice has been entered. This restriction needs to be removed.

Also, Manager cash basis reports are inadequate as they do not exclude all open accrual transactions. Invoices (both sales and purchase), adjustment notes (both sales and purchases), billable time entries and billable expense entries are correctly excluded from cash basis reports. Payslips, expense claims and depreciation should also be excluded from cash basis reports. Also, the system would need to have an option to flag journal entries that are reversing accrual journals (entered in one period and reversed in the next) used for recording items such as accrued interest on a term deposits, so these could be excluded as well.

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45

That’s a good example. Therefore accounting basis option could be enabled if you have any billable time (even if you didn’t enter any invoices yet).

Exactly. This is the reason why the option of accounting basis was removed if no invoices are in the program. The option does nothing while it implies it does something. All journal entries will be included in reports regardless what accounting basis you select. So why even show option to select accounting basis if all journal entries will be included regardless what you select.

Well, the main reason why businesses require cash basis reports is because they pay taxes on cash basis. Depreciation is always tax deductible on cash basis. Payslips and expense claims are generally tax deductible on cash basis too (but technically speaking they probably shouldn’t if employee is owed money or expense claim hasn’t been reimbursed).

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I’m trying to understand what are you all trying to achieve if accounting basis is never hidden. The way accounting basis is implemented in Manager is that it makes impact only if there are invoices or billable time. If there are no invoices or billable time, the option does nothing (therefore it’s not visible).

Do we at least get an agreement the option does nothing if there are no invoices or billable time?

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I think one other situation discussed is the journal. If a journal entry is created that affects one of those accounts (e.g. Accounts receivable or Billable time - movement account), I would assume it also has an impact then?

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I’m assuming to have these accounts in the first place, you’d have invoices or billable time so the option would be visible.

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The accounts affected when switching between cash and accrual include not only Billable time - movement, but potentially every income or expense account. Obviously, most of the P&L accounts would only be affected if invoices are involved, under which circumstances the selection would be possible.

My position on all this is that the selection of cash or accrual accounting is a basic choice. Therefore, you should be able to make it when setting up a company. Someone with a carefully considered chart of accounts and a well thought out business structure (including plans for bank accounts, invoicing policies, and so forth) should be able to set up a business completely before the first transaction occurs. The notion that I must enter transactions before I can make a choice runs against an underlying premise of Manager—that the user is in control of what is activated and when.

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No, and that’s missing the point.
Manger, as stated many times, used to have this function working perfectly correct.
You seem to see this as a mechanical process, rather then a user selectable process.

The more important question is - why did Manager “fix” a user friendly function that wasn’t broken ?

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Would it be possible to use the code which is currently hiding the option to select accounting method, to instead control display of a warning such as “this setting currently has no effect as there are no invoices or billable time entered into Manager”, but still allow the user to set the parameter.

That way if a user was assuming Manager could achieve the benift of an alternative accounting method, they would be warned if they hadn’t yet entered sufficient information.

And conversely while all the settings have no effect until they are used, it is still desirable to customise the program well before it is actually needed as many users will not remember to set it at a future time when the setting would make a difference. Also I think it does change Manager prior to then as otherwise it gets the report headings wrong.

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Hi , I am posting this thread as I have been recently asked to provide Cash reporting in the P&L and have found as mentioned earlier in this thread , that Depreciation is included in the cash report. This is not correct as it is not a cash expenses. It is only a small thing to be query about I know, but true cash reporting will not include depreciation? This post is to ask is it possible to fix this?.
Mostly as it has effect of creating doubt in the mind of the user and the receiver of the report that the report is correct .

I think Manager does things very well and is improving all the time, the depreciation should be addressed as it is a fundamental accounting principle in a way, that only cash related items included and depreciation is not a cash related item.

If this could be looked at it and fixed , it would be beneficial improvement to the good reporting that can be generated via manager regarding cash reporting .

Thanks

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The switch between Accrual basis and Cash basis in the reports only affects the manner in which incomes and expenses are counted as having occurred - even if you prepare your accounts on a cash basis, you will still have to record depreciation and other non-cash entries.

A P & L will always have to include depreciation and other such expenses.

You are possibly looking for a Cash Flow report - Manager has a number of Cash Movement reports but unfortunately they are not really a proper Cash Flow reports in strict accounting terms.

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It is still visible in some (maybe only one?) instances. There’s an “Accounting Method” column on the “Trial Balance” report screen. If the goal is to keep the method hidden, to avoid confusion, then having that column default to say “Accrual Basis” will probably run counter to that goal for many users. I can’t recall where else I might have seen the stated method. Perhaps on a report subhead. But it should either be fully hidden (not the choice I’d make) or be fully customizable.