How to Switch from Cash to Accrual

Question: Can I just switch from cash to accrual basis in my company? There is a button to do that in QuickBooks.

Answer: Generally, you cannot switch your basis from cash to accrual or accrual to cash without a significant and legitimate business reason, and a government sanction, too.

That being said, QuickBooks does have a toggle button to switch reports from cash to accrual or vice versa. Primarily this switch is used once when a business initially chooses its basis in QuickBooks.

But also, it allows you to view your business from two different perspectives, which can be helpful in your cash flow management. Viewing your income statement from a cash basis shows your income actually received. The accrual view shows all the income invoiced.

Cash basis is reporting income, and expenses based on the actual dates cash is received or paid.

Accrual basis is reporting income, and expenses based on the dates invoices are received or created.

Most small businesses pay taxes on a cash basis, but at a certain income level, U.S. businesses must pay taxes on an accrual basis. Check with your tax preparer and/or look at your previous business tax returns to see which basis is used for your business.

Please email your questions to Harriet at Ask The Accountant.

QuickBooks Premier and Enterprise can be modified to better serve ad specialty distributors. Harriet Gatter is a QuickBooks ProAdvisor, a former accounting professor and a former ad specialty distributor. She advises ad specialty distributors to use QuickBooks Premier and Enterprise, often in conjunction with other industry-specific software, to manage the complexities of the ad specialty business, with the results being time saved, errors eliminated and an overall accurate accounting of your business. Contact her at hgatter@accountingsupportllc.com.