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Posting When You Use Cash Basis Accounting

When you use the cash basis accounting method and submit the Payables Transfer to General Ledger program, Payables transfers only accounting information for paid invoices to the Payables general ledger interface table. When you use the cash basis accounting method, you do not record accounts payable liability information in your general ledger.

The accounting distributions for an invoice payment typically debit expense or asset accounts and credit your cash or cash clearing account. When you post payments, Payables may also create distributions for discount taken and foreign currency exchange gain or loss.

Payables uses the payment date as the accounting date for your expense and cash journal entries so that journal entry batches balance.

See Also

Encumbrance Entries in Payables

Partial Payments

Payables posts partial payments by prorating the paid portion among all the invoice distributions. You can, therefore, have partially posted distributions. You can transfer journal entries to your general ledger for both paid and partially paid invoices.

The following examples are identical to the accrual basis examples in Figure 1 - 13, except they assume you use cash basis accounting. Note that Payables does not record any liability transactions when you use the cash basis accounting method.

Example 1

You enter and approve an invoice for $100 with payment terms that allow you to take a 10% discount on the invoice if paid within 10 days. When you post the invoice, Payables does not record any invoice transactions. If you initiate posting, Payables will not record any invoice transactions.

You pay the invoice and take the discount. When you post the payment, Payables records an expense and cash transaction along with the discount transaction.

Example 2

You enter and approve a $100 invoice and a $25 prepayment. If you initiate posting, Payables will not record any invoice or prepayment transactions.

You then pay the prepayment and apply the prepayment to the invoice, reducing the amount due on the invoice. You pay the remaining amount of the invoice and initiate posting. The resulting prepayment journal entry credits your cash account and debits the prepayment account for the amount of the prepayment. The invoice payment journal entry credits your cash account for the reduced invoice amount and debits your expense account.

CASH BASIS ACCOUNTING POSTING RESTRICTIONS:

ADJUSTING INVOICES: When you use cash basis accounting, you cannot update a paid or partially paid invoice after you post the payment. You also cannot update an invoice you paid with a void payment document until you post the void payment. You can adjust distributions for any paid or partially paid invoice that you have not posted.

See Also

Defining Financials Options

Accounting Methods

Adjusting Invoices

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