The Accounts Receivable or Accounts Payable balances should not get displayed on the Cash Basis Balance Sheet because the A/R and A/P tracks open or unpaid invoices and bills. Various companies are using A/R and A/P accounts and reports on the cash basis. Talking about the QuickBooks software, it wasn’t designed to use as a reporting anomalies. The only way you can get assured that the cash basis reports doesn’t have any anomalies is to use such transactions that has no affect on A/R or A/P.

You must be aware of the fact that the QuickBooks transactions has single source account and one or multiple target accounts. The posted accounts can be viewed in any transaction by running the Transaction Journal report. The first line of the Transaction Journal Report displays the source account and the other subsequent line shows the target accounts.

A/R Debit Balances

  • The open invoice along with the sales tax in case if the preferences are set to As of invoice date (accrual basis).
  • A check transferred to a customer that was recorded to the A/R account but it wasn’t linked to any credit memo.
  • An active Invoice or statement charging that has inventory parts along with it.
  • A journal entry that debits A/R in the form of source account and credits a balance sheet account in the form of target.
  • A journal entry that debits A/R in a form of target account.
  • Transferring a credit from one job to another job for the same customer prior to linking thr journal entries to the credit memo for single job and the invoice for the other job.

A/R Credit Balances

  • An invoice with an item that records retainage to a different current asset account.
  • Payment from customer’s side which is not linked to an invoice.
  • A payment linked to a future dated invoice dated if the report date is coming before the invoice date.
  • A credit memo to a customer which is not connected to any invoice or a refund check.
  • A deposit which is created in the A/R account but not connected to a payment or an invoice.
  • A journal entry that credits the A/R in the form of source account and a target is a balance sheet account.
  • A journal entry that credits A/R in the form of target account (e.g., transferring a credit to another job).

A/P Debit Balances

  • A Bill from the vendor’s side that credits a retainage payable account to decrease the due amount.
  • A check or bill payment check not connected to a bill.
  • A bill payment check which is connected to a future dated bill when the report date is lying between the two dates.
  • A journal entry that debits A/P in the form of source account and a target is a balance sheet account.
  • A journal entry that debits A/P in the form of target account.
  • A credit card charge relieving A/P which isn’t connected to any bill.

A/P Credit Balances

  • A bill made for the inventory part.
  • A Bill offset to a balance sheet account.
  • A journal entry that credits A/P in the form of source account and the target account is a balance sheet account.
  • A journal entry that credits A/P in the form of target account.

Sample transactions

  • Example 1: Open invoices that consists Inventory Parts are considered in the A/R balance under a CBBS. The amount that is being displayed in the A/R account is the amount that will be posted to the Inventory Asset account in the form of credit. (The Source account will be A/R and the target account will be the Inventory Asset and both will be balance sheet accounts.)
  • Example 2: Open bills entered to buy the Fixed Assets like office Equipments will be displayed on A/P account on a CBBS
  • Example 3: Open the bills that were entered along with the Inventory Parts debiting the Inventory Asset account credits A/P
  • Example 4: A General Journal transaction with an expense account in the form of debit under the first line and the A/P account under the second line in the form of credit will be displayed on a CBBS. Note: Enter the A/P account (source) credit on the initial line and the expense account (target) as a debit in the second line in order to reverse the lines. (The transaction won’t get displayed on a CBBS.)
  • Example 5: A General Journal entry with an Income account (source) on the initial line in the form of credit and the A/R account (target) in the form of debit on the next line will get displayed on a CBBS. You can reverse the lines and to do so, you need to enter the A/R account (source) in the form of debit on the first line and the Income account (target) credit on the second line the transaction won’t get displayed on a CBBS.

What Are The Recommended Solutions?

Step 1: Identify The Root Cause Transactions

The below-mentioned reports will help you in finding the root cause transactions:

Open Invoices report

  • Go to the Reports menu and the select Customers & Receivables > Open Invoices.
  • From the Date drop-down list, click on the correct date.
  • Select the Customize Report and Advanced
  • Click on As of Report Date.
  • The payments appearing on the report were already received but didn’t get applied to any invoice.

Unpaid Bills report

  • Navigate to the Reports menu and the select Customers & Receivables > Open Invoices.
  • Select the correct date From the Date drop-down list.
  • Click on Customize Report, Advanced and then select As of Report Date.
  • The bill payments checks appearing on the report were already entered but didn’t get applied to any bill.

Customer Transaction Detail report

  • Go to Reports > Company & Financial > Balance Sheet Standard.
  • Select the Customize Report.
  • Go to the Display tab for Report Basis and select Cash.
  • Remove the From date but keep the To date
  • Click on OK.
  • Double-click on the A/R amount to bring up the Transactions as per the Account report
  • Select Customize Report.
  • From the Display tab, remove the From date but keep the To
  • Select Advanced option
  • Then click on the Open Balance/Aging Report Date option
  • Click on OK.
  • Click on Customer under the Total by
  • Go to the Filters tab and:
    • Click on Account from the Filter
    • From the Account drop-down list, click on All Accounts Receivable.
    • For Include Split Detail, click on No.
    • Again from the Filter list, click on Paid Status > Open, > OK.
    • You can click on Memorize if you want to save this report for future usage.
  • All the nonzero customer subtotal affects your A/R balance.

Vendor Transaction Detail report

  • Go to Reports > Company & Financial > Balance Sheet Standard.
  • Select the Customize Report
  • Go to the Display tab and select Cash for Report Basis.
  • Remove the From date and let the To date still there
  • Click on OK.
  • Double-click on the A/P amount for bringing up the Transactions as per the Account report.
  • Select the Customize Report.
  • Go to the Display tab again and remove the From date but keep the To
  • Select Advanced and then click on the Open Balance / Aging Report Date
  • Click on OK.
  • Under the Total by area, click on Vendor.
  • Go to the Filters tab and follow the below mentioned steps:
    • From the Filter list, select Account.
    • Select the Account drop-down icon to choose All Accounts Payable.
    • Set the Include Split Detail to No
    • Again from the Filter list, click on Paid Status
    • Click on Open and then OK.
    • (Optional) Select the Memorize option to save the report so that you can use it again.
  • All the non-zero vendor subtotal will affect your A/P balance.

Step 2: Manually fix the root cause transactions

IMPORTANT: You must create a Back up the QuickBooks company file before going on to the steps.

  • On receipt of payment, modify the Sales Tax preference to Due which is the cash basis option before you run the CBBS.
  • Connect the transactions in the Receive Payment window (A/R).
  • Connect transactions in the Pay Bills window (A/P).
  • The services, noninventory part, and other charge items should already be connected to income and expense accounts:
    • Go to Lists > Item List.
    • Find any balance sheet accounts be it assets, liability, or equity, listed in the Account section.
    • Make sure that any items referring to asset accounts are configured appropriately. Some items (e.g., sales tax, retainers) needs to be pointed to asset accounts.
  • Temporarily remove the transactions that are having issues:
    • Memorize the active transactions and then remove them.
    • Print the cash basis reports.
    • Enter the transactions again from the memorized transactions list.
  • Edit your journal entries (JEs):
    • Differentiate the A/P and A/R parts of journal entries that link multiple transactions including B/S accounts, into different JEs.
    • Transfer the A/R part to the first section (source) of the JE. The offset JEs to an income or expense account will get removed from the report. The JEs that are offset to a balance sheet account will keep on in the report.

Note: Press Ctrl + Insert keys to insert one extra line to the GJE and hit the Ctrl + Delete keys to remove one line from the GJE.

Step 3: (Recommended) Make Preventive Changes To Your Procedures

NOTE: Stop using Inventory items. If you have just a few inventory items:

  • Write down your inventory.
  • Deactivate the inventory items.
  • Create them again as noninventory parts.

If you use invoices and bills then you need to make sure that not a single targets point to balance sheet accounts.

Track A/R and A/P in separate data files:

  • In the main (or cash) data file, provide transactions done through cash only.
  • In the the secondary (or accrual) data file, provide the accrual transactions only.
  • Remove the active accrual transactions and enter them again in the form of cash transactions if the cash has been paid out or paid in.

The provided procedures will allow you to resolve AR and AP balances on the cash basis balance sheet manually. However, if you feel that the process is a bit complex or you are not able to do it manually then you can get in touch with us at our toll-free QuickBooks Support Phone Number +1888-396-0208 get instant answers and support for all your queries.

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Resolve AR And AP Balances On The Cash Basis Balance Sheet: [Resolved]

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