Cash to Accrual

[DomoK]

Hi all,

I'm currently in the process of switching over to accrual starting 2012. What is the proper way to enter a check that is received for 2011 services?

Thanks in advance.

 

[kirby]

Hi
If you HAD BEEN on accrual basis in 2011 then you would have accrued that income, let's say $20K in 2011.

Example (2011 entry under accrual)
DR Receivable for services $20,000
CR Services Income ($20,000)

Then in 2012 when you received the check you post this
DR Cash $20,000
CR Receivable for services ($20,000)

But in 2011 you were not using accrual so - in 2012 at receipt of check if you had no accrual you post this:
DR Cash $20,000
CR Services Income $20,000
and from now on when you earn services income you need to record it by accruing it. OK?

 

[DomoK]

Hi
If you HAD BEEN on accrual basis in 2011 then you would have accrued that income, let's say $20K in 2011.

Example (2011 entry under accrual)
DR Receivable for services $20,000
CR Services Income ($20,000)

Then in 2012 when you received the check you post this
DR Cash $20,000
CR Receivable for services ($20,000)

But in 2011 you were not using accrual so - in 2012 at receipt of check if you had no accrual you post this:
DR Cash $20,000
CR Services Income $20,000
and from now on when you earn services income you need to record it by accruing it. OK?

Thanks. That's what I have been doing. I created an account under the P&L for pre-2012 transactions since I have no AR to match the payments to. I wasn't sure if that was the right thing to do. I book the AR monthly now and there's barely any expenses to accrue.

 

[jfuertes]

If you want to read more about this, you can look the book of donald kieso, on intermediate accountant, is really good.