Hi,
I help manage the books of a small company, and we are considering switching to Cash basis reporting. We have been using Accrual basis, so I wanted to figure out how to convert and display the accounts in the Income Statement.
From what I have found online, I need to make adjustments using beginning and ending values of various accounts: A/R, A/P, Inventory, and so on - and also ignore some accounts like Depreciation. I understand this.
However, our company has previously created our Income Statements with a single Revenues section and a single Expenses section, which have been acceptable for our purposes. We would display each applicable account in its section, then total these up.
My question is, is it possible to maintain our current formatting when moving over to Cash basis? I've read somewhere that we should call the sections "Receipts" and "Payments" instead of "Revenues" and "Expenses".
Would we still be able to display our accounts within a section, then alter it with a sign if necessary? Furthermore, how would we know under which section each applicable account belongs?
An example of how I'm treating our accounts in Receipts is as follows: Service Revenues is treated as a positive, and A/R is treated as a negative. This makes sense up to a point, but then I wonder under which section would accounts like Loans Payable appear. My problem compounds when I have both a Receipt account and a Payment account as sub-accounts of some parent account... I have no idea where or how to display this parent account.
I have been told not to completely rework the format we've been using if possible, so any advice would be appreciated.
I help manage the books of a small company, and we are considering switching to Cash basis reporting. We have been using Accrual basis, so I wanted to figure out how to convert and display the accounts in the Income Statement.
From what I have found online, I need to make adjustments using beginning and ending values of various accounts: A/R, A/P, Inventory, and so on - and also ignore some accounts like Depreciation. I understand this.
However, our company has previously created our Income Statements with a single Revenues section and a single Expenses section, which have been acceptable for our purposes. We would display each applicable account in its section, then total these up.
My question is, is it possible to maintain our current formatting when moving over to Cash basis? I've read somewhere that we should call the sections "Receipts" and "Payments" instead of "Revenues" and "Expenses".
Would we still be able to display our accounts within a section, then alter it with a sign if necessary? Furthermore, how would we know under which section each applicable account belongs?
An example of how I'm treating our accounts in Receipts is as follows: Service Revenues is treated as a positive, and A/R is treated as a negative. This makes sense up to a point, but then I wonder under which section would accounts like Loans Payable appear. My problem compounds when I have both a Receipt account and a Payment account as sub-accounts of some parent account... I have no idea where or how to display this parent account.
I have been told not to completely rework the format we've been using if possible, so any advice would be appreciated.