PSA L&P - Accounting Basis: How to change from cash basis accounting to accrual basis

How to change from cash basis accounting to accrual basis

ParishSOFT must make this change for you. 

When your data is changed from the cash method of accounting to the accrual method of accounting the following will happen:

Some accounts, dates, and budgets will be affected:

  • account update: All bills starting at bill #1 to current will be changed to use the accounts payable account, instead of the bank account.
  • invoice date update: The invoice date and the check date are compared. If they are in different months, the invoice date will be changed to match the check date.
    • This will essentially reflect the cash system that all past transactions were under when they were created since Invoice date and check date will be the same, resulting in a debit and a credit to accounts payable in the same month for each transaction.
  • reports: Printing reports from the past should still tie out the same as the old reports
  • budgets to the point of change: Budgets through the change date should not be affected. 
  • unpaid bills: Unpaid bills will affect expenses on the invoice date, not on the check date
  • budgets from the point of change forward: Budgets going forward could be affected depending on how unpaid bills are treated after the conversion.
    • In a cash-based system, the expense is debited (increased) on the check date.
    • In an accrual-based system, the expense is debited (increased) on the invoice date.
    • After the change to an accrual-based system, any bills that are yet unpaid will increase expenses on the bill date. For at least one month, the expenses may look inflated because all of the expenses are affected by both the checks that have already been written and dated in that first month and also by the unpaid invoices with invoice dates for that same month.

How bills are paid will also change:

  • When you start the checks process, you must now select a bank account from which to pay.
  • Once you select the bank account, you will see every open bill in the system, not just those assigned to that bank account. 
    • Make sure to select the correct bills to be paid from the selected bank account to avoid paying a bill from the wrong account. 
    • Of course, if you only have a single bank account this isn't an issue.

If you would like to change your accounting bases from cash to accrual, please contact support.

 


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Accounting Methods: Cash vs Accrual (Videos) 

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