The Cash Basis Balance Sheet (CBBS) should not show Accounts Receivable (A/R) or Accounts Payable (A/P) balances because these accounts track open (unpaid) invoices and unpaid bills. Many companies use A/R and A/P accounts and report on the cash basis. QuickBooks was not designed to be used in this way and reporting anomalies result. The only way to assure that cash basis reports have no anomalies is to use only transactions that do not affect A/R or A/P.

Be aware that every QuickBooks transaction has one source account and one or more target accounts. You can view the posted accounts in any transaction by running the Transaction Journal report. The first line of the Transaction Journal Report shows the source account. All subsequent lines in the transaction show the target accounts.

For A/R Credit Balances:

1. An invoice with an item recording retainage to another current asset account.
2. A payment from a customer not linked to an invoice.
3. A payment linked to an invoice dated in the future if the report date is before the invoice date.
4. A credit memo to a customer not linked to an invoice or a refund check.
5. A deposit recorded to the A/R account but not linked to a payment or an invoice.
6. A journal entry crediting A/R as the source account and a target is a balance sheet account.
7. A journal entry crediting A/R as a target account (e.g., transferring a credit to another job).

Recommended Solution:

Step 1: Identify root cause of transaction

1. Open Invoices Report
2. Unpaid Bills Report
3. Customer Transaction Details Report
4. Vendor Transaction Details Report

Step 2: Manually fix the root cause transaction:

1. Link transactions in the Receive Payments window (A/R).
2. Temporarily delete the transactions and the delete them.
3. Reenter the transactions from the memorized transactions list.
4. Memorize the open transactions and then delete them.
5. Edit your journal entries (JEs):
6. Separate the A/P and A/R portions of journal entries that combine several transactions involving B/S accounts, into separate JEs.
7. Move the A/R portion to the first line (source) of the JE. Those JEs that are offset to an income or expense account will drop off the report. The JEs that are offset to a balance sheet account will remain on the report.

Step 3: Make preventative changes to your procedures.

We at Stenson Bookkeeping Simplified are ready to help at the end of telephone (214-543-1855), a text or an email (jlmottram@stensonfs.com).