4 ms·

But it's a binary choice for a company to select one method of accounting or the other. I know you can get both views from within QB but for tax filing purposes

But it's a binary choice for a company to select one method of accounting or the other. I know you can get both views from within QB but for tax filing purposes you're either cash or accrual. If we've elected to use accrual-basis accounting then when we sign the contract for a deal we book that revenue immediately (whereas if we're cash basis it's not on the books until it's in our bank acct). But by using a P&L report that shows us as having made all that money which can be dangerous if you're using those numbers to plan. I'm just wondering what the conditions are under which it's desirable for a startup to elect to use accrual-basis accounting for their books? You can get the cash-basis view in QB while being an accrual-basis company but what's the advantage of introducing that complexity?

cperciva 18y ago
for tax filing purposes you're either cash or accrual. Being in Canada, I never had that choice -- Canadian income taxes require the use of accrual accounting. But I'd use accrual accounting even if I had the option of cash accounting: Tarsnap users pre-pay, so I've got lots of cash which doesn't count as "income" yet under accrual accounting.
- andyjdavis 18y ago
  In Australia you have the choice of one or the other until your annual turnover reaches some fairly large threshold then you have to move to accrual. Personally, Id always use cash accounting given the choice. If you always get paid up front or if you have a large cash reserve it doesnt matter but otherwise when cash actually hits your bank account is all that matters. Having a whole bunch of outstanding invoices is no good if the bank account is empty. Use cash accounting and focus on cashflow.