Help with accruals and cash vs accruals basis reports

Hi. I am having some issues getting Manager to generate accurate cash basis P&L reports when accruing expenses and am hoping somebody can help me please.

I have created a liability account titled ‘Accruals’ so that I can accrue expenses via manual journal entries. When the expense is paid I create a new manual journal to reverse the accrual and enter the expense as normal via the ‘Cash Accounts’ tab or ‘Purchase Invoices’ tab. However the expense still shows up in the cash basis P&L when the accrual is made, even if no cash is involved. How can I solve this?

The cash basis P&L seems to work fine when no accruals are involved and the expense is recorded in the ‘Purchase Invoices’ tab and subsequently paid on a later date, but I just can’t get the same to work with accruals.

We need to be able to run reports on both an accruals basis and a cash basis, so I cannot enter transactions on a cash basis. I would be very grateful for any advice on how to solve this.

Thank you in advance.

Follow the advice of @Brucanna in this post - Do not use reverse journal entries

A better approach would be to create a journal entry to accrue the account in the balance sheet and when you are ready to pay it, pay the monies directly to the accrued account as explained by Brucanna. Do not do a reverse journal entry. The developer is intending to make this process simpler without using reverse journal entries or remembering to pay the accrual account

Thank you dalacor. Your help is much appreciated :slight_smile:

I did try the way Brucanna has outlined as well, but unfortunately it doesn’t seem to solve the cash reporting issue - perhaps I am doing something else wrong?

Also by allocating the monies directly to the accrued account, there is no chance to enter certain details which may not have been known when the expense was accrued (e.g. reference #s), unless I have to go back and edit the original accrual?

It is useful to be able to see certain details when clicking on the relevant expense code (rather than going into accruals, where the payment will be logged).

Thank you very much again.

I will ask Brucanna to look at this, because this is more his area of expertise.

But my understanding is that you only need to put a reference number at the time of paying the bill so against the accrual account in the new year. There is no value in a reference number against the original transaction as no money is actually being transferred therefore no reference number is required and there is nothing to reference against.

You should be able to see all the details when clicking on the expense account for the current year. You can configure Manager to show all years by changing set period. What is missing from the expense account. I have just looked at my accounting fees expense account - some of which is accrued and I am not seeing anything missing.

@afid_volunteer, your posts are very confusing - what do you want cash, adjusted cash or accrual basis reporting. You cant take up Journal accruals and expect to get cash only basis reporting. If your focus is cash basis but you want to take up certain end of financial year adjustments (adjusted cash) then your Journals would be dated - say June 30. If you go via the reversal path (not recommended) then the reversal Journal would be dated July 1 and the actual expense would also be either dated July 1 or later. The preferred alternative would be no reversal Journal, but post the actual expense dated July 1 or later directly to the accrual account - then the P&L account has only one entry compared to three entries.

This is a personnel choice, in three, six months from now is it really relevant - why would you be looking backwards.

Thank you both. Apologies if my posts were a little confusing. The (small) company I am helping is moving from cash basis (single entry) to accruals basis (double entry - using Manager) and the accountant asked me if he could view reports on both basis. I then played around with it and this led to my first post.

However I am not expecting there to be many accruals at all as in this part of the world you don’t get anything until you have handed over the cash!

So it was more of a hypothetical situation but I wanted to cover the scenario in case it arose.

With regards to the details, the company numbers all its receipts and wants to include this receipt # in the system for ease of reference.

Hope this makes more sense now. Thanks again.

Firstly, there is no such thing as single entry accounting. Both Cash and Accrual Basis are double entry systems. You allocate to Bank and to Accounting Fees - these are two entries hence the term double entry accounting.

All you have to do is do the report in Cash View and then do another report in Accrual View. You should not need to do any entries any differently. The only time you want to do the reverse journal concept is when you want a payment to be allocated to a specific year, but you are only actually making the payment in the following year. You need to do this for Cash Accounting - this does not apply for accrual based accounting. For Accrual Accounting the transaction takes place when you record the transaction not when you pay the bill hence there is no requirement to do anything.

You just need to create the reports in both views - you do not need to change any transactions. You do not need the accruals Account if you are moving to Accruals based accounting as this is only used in cash based accounting when you want to allocate an expense when recorded not when paid.

All that really happens when you move from Cash Based to Accrual Based Accounting (and I speak under correction) is that your company accounts financial records are shown on accrual basis ie when the transaction occurred, not when the bill was paid and your tax bill is based on the accrual figure not the cash based figure. You do not have to change a single thing in accounting otherwise. You just do your reports in accrual format not cash basis format. Again @Brucanna can confirm this as my accounting skills are not at the same level his are.

Thank you. Perhaps I have been wording my questions badly, as I do not need any accounting advice. I am a chartered accountant and I am fully aware and comfortable with accruals and cash based accounting, and the entries required.

I am just completely new to Manager and was hoping for some guidance on how to use this particular system.

I refer to single entry accounting loosely - what I meant was that they only keep a sales and payment ledger, plus separate bank and cash records, though they do not all tie in together. This is generally referred to as a single entry system.

Thank you again for your help.

I will leave this question to be answered by someone who better understands cash and accrual accounting with regards to your specific query as I don’t have sufficient information to be able to answer your question I am afraid.

No problem and thanks for your earlier responses. Its not a big issue, I just thought I would try asking in the forum :slight_smile:

If it helps anyone to diagnose the problem I am having, before even considering releasing the accrual, if I do a manual journal entry to accrue rent for example:

Dr Rent expense £300, Cr Accruals £300

then it still shows up as an expense on the cash basis P&L. This is what I am finding a little confusing - forget all the other stuff about how to release etc. as I think this is complicating things…

Its doing what its intended to do. When you Dr Rent and Cr Accruals what you are doing is making the rent expense show in the P&L on Cash Basis at that point in time. This is the whole point of doing a journal entry to the accrual account for a cash based system.

For example, on the 31st March 2015, I debited Accounting and Credited Accruals and Deferred Income. What this did is it put the expense on the P&L for that year (2015) even though I had not as yet paid the bill. When I go to the new year, as my tax year starts on the 1st April, then don’t see that cash entry in the profit and Loss Statement.

I have set the date on the summary page to start from the 1st April 2016 so I don’t see P&L Transactions for the previous year.

Perhaps your issue is more when you have your set date on the summary page as well as for your reports.

Make a dummy transaction for say 31st July and make your set date 1st August and you will see that you no longer see the entry in P&L. At the top of the Summary Page, click Set Period to change the date. This will affect the view in Summary Page, but obviously not the view in reports.

Bear in mind that the summary page defaults to accrual not to cash basis view. I prefer to use the summary page in accrual mode and to use the reports in cash basis mode as this gives me a better view of my finances.

I have been re-reading the entire post and I think now I finally understand the question you are actually trying to solve.

You want to view the reports in both accrual and cash basis mode so in accrual the report would show the transaction date as 31st March and in Cash Basis, the report would show the transaction on the date that you actually paid the invoice.

However, when you do the journal entry to the accrual account you are telling Manager to make that the transaction date even though you are paying the bill later. Hence you won’t get the report to show when you actually paid the invoice because you have accrued the transaction.

I think the simplest thing to do would be to complete the financial year in cash basis and accrue any transactions that need to occur in that financial year. Then in the new financial year, just switch your reporting to accrual basis and then you are done. You can’t to my understanding get Manager to show both the accrual date and the payment date if this is what you are trying to do. When you accrue the transaction you are effectively changing the transaction date in cash based accounting regardless of the payment date.

I hope that I have finally understood the question and the short answer is that I don’t think that you can do what you are trying to do.