It appears that I’ve run into an issue when generating reports (e.g., Income Statement) using cash-basis accounting. When viewing a Trial Balance Report, I get an imbalance in Sales.
I’ve identified one specific invoice that was generated in the preceding year (2014), but paid in 2015. If I were to re-edit this invoice and show it generated in 2015, the Sales is properly recorded and reported, and Trial Balance and Income Statement are congruent.
So, my gut suggests that the rules for generating a Trial Balance Report are based on accrual accounting rules, and not cash-basis accounting. All other reports appear to be accurate.
Sorry for not limiting this more specifically so you can more easily repro this issue: I just now ran into this issue as I’m preparing documents for my accountant.
FYI, I’m in the US, and currently running v. 16.2.11 (under Linux, but I don’t think OS is a factor).
Your clarification confirms what I had been seeing: that the Trial Balance is indeed accrual-based.
To your question, perhaps I’m missing something, but my immediate answer would be because my business is running cash-basis accounting rules, and it’d be much easier to generate reports that are consist with the accounting system chosen (in my case, cash-basis).
Do you have a recommendation for how to follow best practices in generating end-of-reporting-cycle reports as implemented?
@richbl, a check of several accounting web sites confirms the common opinion that modern accounting software has made trial balances largely superfluous. Their purpose, of course, was originally to check for errors. But in Manager, for example, a non-zero balance in the Suspense account reveals the kind of unbalanced transactions trial balances could turn up.
For some reason, the trial balance won’t go away. Maybe accountants find it useful for padding their bills. At any rate, it was always meant as an internal tool preparatory to preparing the financial statements (balance sheet and P&L). The same basic information is available on the General Ledger Summary (plus more).
I’m a book-keeper, not an accountant, and supply a trial balance to the accountants at year end. Wouldn’t want to be without it. I don’t do P&L or balance sheet.
The question, of course, is what do the accountants do with the trial balance? My guess is that they use it as an excuse to bounce the records back to bookkeepers who were not diligent enough to verify their work before submitting. That keeps them from having to work on books with embedded mistakes as they generate financial statements. But it doesn’t really give them additional information. And I know from your previous posts how careful you are, @patchworkfields.
You will notice from the beginning posts in this topic that @richbl is definitely generating his own financial statements.
I guess I deal with small companies if that makes any difference. I always do bank reconciliation, check aged customers and suppliers and do Vat reconciliation [where appropriate]. The accountants send me end of year journals for things like depreciations. Still hope we keep trial balance.
I don’t think there is any danger of eliminating the report. And I certainly would never advocate giving up on reconciliation, of bank accounts or any other aspect of accounting. My point to the earlier poster who was concerned about the trial balance only being available on the accrual basis was that the actual report has less use than it used to.
Inasmuch as I understand that the trial balance may be superfluous to some, quite a few CPAs that I work with (either professionally or socially) still require them UNLESS they have access to company books. My past accountant (now retired) and my current accountant both ask for a trial balance expressly to double-check reporting. In my own case, I keep my company books and pass along reports to my accountant for review in preparation for the tax season. I’ve never not delivered a trial balance report.
As I had indicated initially, my books are kept following cash-basis accounting procedures. While I understand that the trial balance may be waning in the world of accounting, quite a few accounting products still use the trial balance as a report, and specifically the option to generate either an accrual or cash-basis trial balance (e.g., QuickBooks).
So–perhaps selfishly–I think it’d be great to offer a cash-basis trial balance in Manager.io. Though, from my own due diligence,I have to imagine that my use case isn’t particularly unusual.
@Lubos: Great! Please add an optional Title field to the Trial Balance report configuration page that can be used to change the title of the report, similar to the existing field for most other reports. Otherwise, it is now impossible to distinguish at-a-glance whether a printed Trial Balance report was prepared based on cash-basis or accrual-basis accounting.
(As a rule, you might consider automatically adding the text “Cash basis” or “Accrual basis” as a subtitle on all reports that can be prepared one way or the other.)
At any rate, it was always meant as an internal tool preparatory to preparing the financial statements (balance sheet and P&L). The same basic information is available on the General Ledger Summary (plus more).