Accrual Basis Accounting Overview

Body

Overview

With Accrual Basis Accounting, as source transactions are entered and posted, they have a General Ledger impact in the Accounting Period that the transactions were posted. With this method:

Revenue is recorded as it is earned, regardless of when a payment is received. For example, a company might provide a service to a customer in June of 2024, but the payment for this service is not received until July of 2024. The revenue for the service will be recorded in June when it was provided.
Expenses are recorded as they are incurred. For example, a company receive an invoice for a subscription in June of 2024, but the invoice is paid in July. The invoice is recorded in June, during the time period when the subscription was being used.
Sales tax is recorded and reported on an accrual basis.

If you are currently using the Accrual Accounting Method, you have the option to remain on this method and continue normal processing. No changes are required. Otherwise, you can switch to: Cash or Accrual and Cash (Multi-book) Accounting Method.

Best Practice: If you would like to start using the Cash Accounting Method, we recommend tracking your business on both Accrual and Cash Basis (Multi-book Accounting). This will allow you to get a true picture of your business performance while at the same time, keeping a close eye on money coming in and money going out. Selecting Accrual and Cash as the Accounting Method will require an additional Ledger. For more information, please send an email to licensing@accountingseed.com.

Large Data Optimizer when using Accrual Basis Accounting

When using the Accrual Accounting Method, if you have a high volume of transactions, our best practice recommendation is to enable the Large Data Optimizer (LDO) feature. LDO was included with the Spring ’24 release, and it provides the ability to post/unpost more lines on these source documents: Billings, Payables, and Journal Entries.

If you want to have the Large Data Optimizer (LDO) feature enabled, submit a case to our Customer Support team. Once the LDO feature has been enabled, when you post/unpost any of the above source documents from the detail page or the list view, the records will be posted/unposted asynchronously as a system background process.

Consolidation Ledgers with Accrual Basis Accounting

You can create Consolidation Ledger Hierarchies for Accrual Ledgers and separate Ledger Hierarchies for Cash Ledgers. However, an Accrual Ledger cannot be consolidated with a Cash Ledger. If the parent on the Ledger Hierarchy is Accrual, then all of the children must be Accrual. And, if the parent on the Ledger Hierarchy is Cash, then all of the children must be Cash. For more information about the Ledger Hierarchy when using Consolidation Ledgers, refer to the Set up Consolidations article.

Best Practice: If you change the Accounting Method on a Consolidation Ledger, we recommend that you create a new Ledger Hierarchy. For more information, refer to the Set up Consolidations article.

Important: When you create a Ledger with the Type selected as Consolidations-Transactional, the Accounting Method must be either Accrual or Cash. It cannot be Accrual and Cash (Multi-book Accounting). An error message will display if you attempt to select Accrual and Cash on a Consolidations-Transactional Ledger or Consolidations-Budget Ledger.

Financial Reports and Salesforce Reports

Accounting Seed Financial Reports, as well as reports that are created using the Salesforce Report Builder can be selected by Ledger. Therefore, when running reports, you can simply select the Accrual Ledger to view an Accrual Basis report or the Cash Ledger to view a Cash Basis report.

Return to top

____________________