Calculation for accrual to cash/tax basis net income

USA Discussion in 'Businesses / Corporations' started by phillrachel, Jan 22, 2019.

  1. phillrachel


    Jan 22, 2019
    Likes Received:
    We use Sage Contractor 100 for our company books which solely runs on accrual basis. However, our tax returns our prepared on a cash basis and we can take the full Section 179 deduction for equipment purchased. We are a home builder so we do have WIP so for example a job closed in 2018 would have had some WIP inventory at the end of 12.31.2017. Is this the correct calculation to get to our cash/tax basis net income:

    2018 Accrual to Cash/Tax Basis Net Income

    Accrual Basis Net Income
    Less Current Year A/R
    Plus Prior Year A/R
    Less Prior Year A/P
    Plus Current Year A/P
    Less 2018 Depreciation Expense - Full Section 179 deduction
    Cash Basis Net Income
    phillrachel, Jan 22, 2019
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  2. phillrachel

    kirby VIP Member

    May 12, 2011
    Likes Received:
    Basic idea is to remove effect of all accruals and all noncash revenues and noncash expenses. This is what you have done so you are ok. Be sure that removing current year AP causes an INCREASE to cash basis income.
    kirby, Jan 22, 2019
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