Invoices Paid in Following Year

Discussion in 'Quicken' started by Dascalargo@gmail.com, Jan 19, 2006.

  1. Guest

    I started using Quicken last year and am trying to generate my Schedule
    C information.

    I generated invoices in December which were not paid until January. How
    does Quicken track this? Since creating the invoice effectively logs
    the income, I assume it will appear I received that income in December
    (i.e. when the invoice was created) instead of in January (when I
    received payment).

    Is this the case? If so, is there an easy way to get a list of actual
    Schedule C gross income?
     
    , Jan 19, 2006
    #1
    1. Advertisements

  2. The Streets Guest

    <> wrote in message
    news:...
    >I started using Quicken last year and am trying to generate my Schedule
    > C information.
    >
    > I generated invoices in December which were not paid until January. How
    > does Quicken track this? Since creating the invoice effectively logs
    > the income, I assume it will appear I received that income in December
    > (i.e. when the invoice was created) instead of in January (when I
    > received payment).
    >
    > Is this the case? If so, is there an easy way to get a list of actual
    > Schedule C gross income?


    I use Quicken H&B to create my invoices and track payments. When
    I run a tax schedule report for last year, it only shows the invoices that
    were paid last year -- it does *not* include invoices created last year but
    not paid until this year (or never paid). Are you seeing something
    different???
     
    The Streets, Jan 19, 2006
    #2
    1. Advertisements

  3. The Streets Guest

    "The Streets" <> wrote in message
    news:mkDzf.2566$...
    > <> wrote in message
    > news:...
    >>I started using Quicken last year and am trying to generate my Schedule
    >> C information.
    >>
    >> I generated invoices in December which were not paid until January. How
    >> does Quicken track this? Since creating the invoice effectively logs
    >> the income, I assume it will appear I received that income in December
    >> (i.e. when the invoice was created) instead of in January (when I
    >> received payment).
    >>
    >> Is this the case? If so, is there an easy way to get a list of actual
    >> Schedule C gross income?

    >
    > I use Quicken H&B to create my invoices and track payments. When
    > I run a tax schedule report for last year, it only shows the invoices that
    > were paid last year -- it does *not* include invoices created last year
    > but
    > not paid until this year (or never paid). Are you seeing something
    > different???


    BTW -- I'm a cash (not accrual) method tax payer.
     
    The Streets, Jan 19, 2006
    #3
  4. Guest

    In that case, you treat the payment as income when you receive it, not
    when you billed for it.
     
    , Jan 19, 2006
    #4
  5. R. C. White Guest

    Hi, Dascalargo.

    You left out the most critical bit of information: Are you on the Cash
    Method or Accrual Method for income tax purposes?

    This is not a trivial question. It's fundamental to every year's reporting.
    You MUST make the choice when filing your return for the first year in which
    it would make a difference, then stick with that choice for that business
    forever (unless you apply for and get permission from the IRS Commissioner
    to make a change). And, since you make the election simply by filing that
    first return, you may already have locked yourself into one method or the
    other without even realizing it, if this is not the first year for that
    business. If you have multiple businesses, you may elect different methods
    for each of them.

    If you are on the Accrual Method, you report income when you earn it, not
    when you collect it. So an invoice for work done in December 2005 is income
    on the 2005 return, even if you don't get paid until 2006 (or 2007).

    On the Cash Method, you report income when you receive it, no matter when
    the work was done.

    Quicken can't make this choice (cash or accrual?) for you. Once you have
    made the choice, you should use Quicken in a way that will let you report
    the proper numbers on your Schedule C.

    You might be surprised to learn that many business "keep two sets of books"
    quite legally. They report to their bank (and to themselves as managers) on
    the Accrual Method because they want to see actual sales and income for the
    year "in accordance with Generally Accepted Accounting Principles". But
    they elect to use the Cash Method on their income tax returns so that they
    don't have to pay tax on the revenue they haven't yet collected. There are
    trade-offs, of course: A Cash Method taxpayer also cannot deduct expenses
    until they are paid, while an Accrual Method taxpayer can deduct them when
    they occur, even if not paid by year-end.

    If you are dealing in merchandise, rather than services, then you are
    required to use the Accrual Method, at least for sales and cost of sales,
    and you must take inventory each year and make adjustments if necessary to
    be sure that those figures stay in line.

    In some businesses, it's not hard to adjust from Cash to Accrual numbers, or
    vice-versa. Just add the difference between this year's and last year's
    balances in receivables and payables. Other businesses are much more
    complicated and there's no easy way to make the adjustments; they have to
    actually keep the two sets of books.

    So it would help us help you if you tell us at least (a) generally what kind
    of business is it (selling merchandise or performing a service or some other
    kind) and (b) whether you will be filing your tax return on the Cash or
    Accrual method. And since there are several varieties of Quicken, please
    tell us the year and version that you are using: Quicken Basic? Quicken
    Home & Business? QuickBooks is a separate application and you will want to
    visit the separate newsgroup for its users.

    RC
    --
    R. C. White, CPA
    (Retired - no longer licensed to practice)
    San Marcos, TX


    <> wrote in message
    news:...
    >I started using Quicken last year and am trying to generate my Schedule
    > C information.
    >
    > I generated invoices in December which were not paid until January. How
    > does Quicken track this? Since creating the invoice effectively logs
    > the income, I assume it will appear I received that income in December
    > (i.e. when the invoice was created) instead of in January (when I
    > received payment).
    >
    > Is this the case? If so, is there an easy way to get a list of actual
    > Schedule C gross income?
     
    R. C. White, Jan 19, 2006
    #5
  6. Guest

    Thanks, all, for the feedback. I hadn't even printed the reports, was
    just assuming the entry would show when the invoice was generated
    (since that was when I chose a category). I could find no mention in
    the help files and online knowledgebase regarding what the reports
    would reflect.

    This is and isn't a new business. I've been working off-and-on as a
    1099ed consultant for years. In 2005 I actually started working under a
    registered business name and Federal ID number, rather than my own SSN.
    Until 2005, this was never an issue; this is the first year when I have
    a significant amount of work done (and thus invoiced) in one year, yet
    paid in the next.

    There is no inventory, just my services, so I think I'll likely go with
    the cash accounting method (though I'll go back and double check what I
    did last year first).

    I am using Quicken H&B, though I'm sure not to its full extent.

    I have another situation I've been pondering which I need advice on,
    but which I'm unsure about whether I can describe sufficiently. I'll
    try:

    I generally receive deposits ahead of time. I have set up an AR account
    into which I enter these deposits. I then enter in that same account
    the invoice, post dated, and apply the deposit to it, thus allowing me
    to generate an unpaid invoices report.

    So, I'm fine up until now.

    Here's where I start to get confused: I have someone consulting with me
    on this job. The agreement is that he gets paid after the client pays
    me. I'd like to track the AP to this consultant along with the AR due
    from the client.

    What I've done is set up a payables account to him into which I enter a
    post dated bill to a consulting category. When the payment comes in, I
    will effectively pay that bill.

    Is there a way to combine the above entries into one. In other words,
    right now I enter information into my general AR account to reflect the
    deposit and the invoce to the client, and then do a separate entry in
    the consultant's AP account to reflect what I owe him. I think what I'm
    doing is sound, even if it's not the best way to do it.

    Now, let's make it even more complicated: I also do work for this
    consultant. In other words, I have both payables to him and receivables
    from him. I use an account which tracks only his receivables, rather
    than the general receivables account. In general, I pay him more than I
    bill him.

    Said consultant -- whose accounting practices are questionable at best
    -- would rather I deduct my receivables from the payables, issue a
    check for the balance, and thus reduce the amount on the 1099 he'll
    eventually get from me. Is this sound accounting? If it's OK, how would
    I accomplish it in QB? If I make a transfer from the consultant's
    payables account into his receivables account, that amount will still
    be reflected on his 1099 and will show as income for me (since it's
    used to pay the receivables account).

    OK, I've confused myself. If anyone can decipher that and point me in
    the right direction, I'd appreciate it.
     
    , Jan 19, 2006
    #6
    1. Advertisements

Want to reply to this thread or ask your own question?

It takes just 2 minutes to sign up (and it's free!). Just click the sign up button to choose a username and then you can ask your own questions on the forum.
Similar Threads
  1. Chris
    Replies:
    0
    Views:
    1,691
    Chris
    Mar 16, 2006
  2. askalot
    Replies:
    6
    Views:
    504
    Phil Marti
    Dec 29, 2006
  3. Bob Alston
    Replies:
    2
    Views:
    1,527
    Larry Stinson
    Dec 17, 2003
  4. Joe
    Replies:
    3
    Views:
    205
    Allan Martin
    Feb 10, 2006
  5. SSMohd

    Paid invoices.. how were they paid?

    SSMohd, Nov 6, 2007, in forum: Microsoft Accounting
    Replies:
    1
    Views:
    297
    SumCPA
    Nov 6, 2007
Loading...

Share This Page