Why a Cash Basis Balance Sheet Lists A/R or A/P

Generally, accounts receivable (A/R) and accounts payable (A/P) transactions do not appear on cash-basis reports because the purpose of these accounts is to keep track of transactions that have not been paid. Listed below are possible reasons an A/R or A/P account might display a balance on a cash-basis balance sheet.

A/R or A/P transactions posting to other balance sheet accounts. When an invoice, credit memo, or bill affects a balance sheet account, in order for that account to report the correct balance on the cash basis balance sheet QuickBooks also must report the other side of the transaction in A/R or A/P.

Inventory items on a bill, invoice or credit memo. By definition, all inventory transactions are accrual-based because they include transfers between balance sheet (generally the A/P or A/R and Inventory Asset) accounts. Inventory items on an invoice or credit memo will be shown on a cash-basis balance sheet as a transfer from the Inventory Asset account. The dollar amount will be the same as cost of goods sold.

Tip: To see the amount being transferred from Inventory on a particular invoice or credit memo on which inventory items are used, press Ctrl+Y to open a transaction journal report that shows the postings. Look for the amounts posted to the Inventory Asset account.

Other transfers between balance sheet accounts. On invoices or credit memos, look for any items that are associated with balance sheet accounts.

Tip: Go to the Lists menu and click Item List. Look for any balance sheet (assets, liabilities or equity) accounts listed in the account column. This does not apply to Sales Tax Payable; sales tax will not be reflected in the balance of A/R on a cash basis even if sales tax is due on the invoice date.

Unapplied payments. To find payments that have not been applied to an invoice, create an open invoices report by choosing Customers& Receivables, and then Open Invoices from the QuickBooks Reports menu. Payments that appear on the report have been received but not applied to an invoice and will be reflected on the cash-basis balance sheet.

Payments applied to invoices dated in the future. Examine the A/R account register for post-dated invoices. If you find post-dated invoices, click on them then hold down the CTRL key and press the letter H for a payment history to see if there is a payment applied to it.

Data damage. If none of the above possible causes apply to your company data file, you should run the Verify Data utility to check for damage to your company file. To verify data choose Utilities from the File menu and select verify.

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