Cash Basis Accounting

THE THEORY

Cash Basis and Accrual Accounting differ in the manner in which they deal with the issue of when to recognize revenues and expenses. The Cash Basis focus is, as its name implies, on the flow of cash. That is to say, whenever cash is collected revenue
is recognized as earned. A similar basis for expenses is used, namely whenever
cash is disbursed the related expense is recognized as having been incurred.

In Accrual Basis, revenue is recognized when it is earned.  The recognition of expenses follows in a similar manner, by booking them when incurred.  This recognition is
independent of any payments received or paid since cash is not the criteria for
recognition.

Many companies use cash basis accounting for reporting of taxes, but operate and manage their business on accrual basis accounting, for both income statements & balance sheets.  Many Accounting Systems on the market today operate as an accrual or cash basis system only, but not both.  Cash Basis is calculated manually
outside the system, usually at year end and often by an outside CPA for an
extra cost.

Fortunately, Deltek Vision does both at the same time, and with no special utilities involved, nor any extra cost.  This is an excellent feature because it allows firms to report both accrual and cash basis financials throughout the year.

SETUP

For Cash Basis Accounting to work  properly you must map some Cash Basis Asset & Liability accounts to your Accrual  Income Statement accounts.  As a general
rule, you only need to map accounts receivable and payroll liability accounts
to the accrual income statement accounts where you want your transactions to
post for cash basis reporting purposes.   Deltek Vision handles all Accounts Payable processing without any additional  setup required.  The account charged when
A/P payments are issued will be the same as the original account on the A/P
vouchers.

ACTIVATING & ENABLING CASH BASIS

Cash Basis can be set up at any time.  It is common to begin at the beginning of a
fiscal year, but with Deltek Vision it only matters that you begin at the
beginning of a month.  All that is required is that all Trial Balance account balances have to be translated from accrual to cash basis.  Once translated, the closing
trial balance from the prior period becomes your opening Cash Basis Trial
Balance.  You import these thru Utilities, History Loading, Account Balances.

PROBLEMS

When an AP Voucher is paid, Vision recognizes the cash basis event.  However,
if an adjustment or Billing Transfer is later made to the voucher after the
payment has been made there is no cash event for Vision to recognize.

Likewise, the same goes if you are using Company Paid Expenses on the Expense Report for employees.  Those are expenses on the expense report recorded by an employee but paid by company credit card, not reimbursed to the employee.  When you pay the expense reports any expenses marked Company Paid, will have NO Cash Basis Accounting for those accounts since those have not been paid with a check.

SOLUTIONS

For either AP Vouchers or Expense Reports, a manual cash only journal entry could be created and posted.  Or for AP Vouchers, you could void the check and reissue with the same number which would then recognize the cash basis event for all accounts in the voucher.

For Employee Expenses paid with company credit cards, I can provide you with “a work around” that will automate the Cash Basis Accounting.

For AP Vouchers, I can provide a Sql Query to report Voucher Adjustments or Billing Transfers after payments have been made and then update the Cash Basis Accounting at month end.

In either case, this requires that processing procedures be put in place and followed in order for Cash Basis to be properly recorded.

REPORTING

Once enabled and Account Balances  have been loaded, then reporting is available on all standard Vision reports found under Reporting/General Ledger.  On  all reports, on the General Tab of the report options check the box that says “Cash  Basis”.  All balances or activity reported will  then result in Cash Basis instead of Accrual balances and amounts.

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