2 Setting Up Cash Basis Accounting

This chapter contains these topics:

2.1 Setting Up Cash Basis Accounting

The system creates cash basis entries based on the document type of the accrual entry in the AA ledger. When you set up the system for cash basis accounting, you must exclude those document types for which you do not want the system to create cash basis entries. Additionally, you determine the document type that you want the system to use for the cash basis entry and, if necessary, set up and assign the document type in a UDC table.

When you set up the system for cash basis accounting, you must ensure that cash basis automatic accounting instructions (AAIs) are set up properly. Cash basis accounting uses AAIs to track differences that might occur in the A/P and A/R systems as a result of using value added tax (VAT) or use taxes. If you enter unapplied cash receipts, the system uses an AAI to provide a suspense revenue account for the cash basis entry.

2.2 Excluding Document Types

You must identify the document types in the AA ledger that you want the system to exclude when creating cash basis entries in the AZ ledger. The system creates an entry in the AZ ledger for every entry in the AA ledger with a document type that does not appear in user defined code (UDC) 00/DX (Excluded Document Types).

You should exclude PV, PL, PM voucher and RI invoice document types because the system should not create cash basis entries for these document types until you pay them. You should also exclude document types that do not represent cash transactions, such as:

  • Automatic entries (AE)

  • Credit memos (RM)

  • Debit memos (PD)

  • Adjustments (RA)

  • Recurring documents (PR and RR)

  • Finance charges (RF)

  • Accrued property taxes (JT)

  • Depreciation entries (DP)

Ensure that you analyze any custom document types for exclusion of cash basis entries. Do not exclude document types that represent the void for A/P payments (PO) or A/R receipts (RO, RV).

To exclude document types

Navigation

From Cash Basis Accounting (G09314), choose Document Types to be Excluded

  1. Verify that the document types you want to exclude are in the UDC table.

  2. If the document type does not appear, add it to the table.

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2.3 Setting Up Cash Basis Document Types

You must decide which document types you want the system to use when it creates cash basis entries. JD Edwards World recommends that you do not use the same document type in both the AZ and AA ledgers. Using the same document type could cause confusion when you locate a journal entry because both the AA and AZ ledger records would appear, suggesting that the record had been entered twice. Using the same document type might also increase processing time because the system needs to distinguish between the two records in the Account Ledger table (F0911).

If you do not set up cash basis document types, the system assigns them based on the document type of the originating entry. The system uses the first character of the document type in the AA ledger entry and the letter Z for the second character.

For example, if an entry in the AA ledger has a document type of PT and you do not set up a cash basis document type, the system uses the document type PZ for the cash basis entry. Because all A/P payment document types begin with the letter P (PK, PN, and PT), all cash basis entries for A/P will be assigned a document type of PZ unless you set up a different document type. To differentiate cash basis payment transactions by document type, for example, you might set up the document type PZ for automatic payments, MZ for manual payments, and TZ for electronic payments.

Each document type that you use for cash basis entries must exist in UDC 00/DT (Document Type - All Document Types).

2.3.1 Before You Begin

  • Determine the document types that you want to use for cash basis accounting.

To set up cash basis document types

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From Cash Basis Accounting (G09314), choose Valid Document Types

  1. Verify that the document type exists in the UDC table.

  2. If the document type does not exist, add it to the table.

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2.4 Assigning Cash Basis Document Types

After you set up the document types that you want the system to use for cash basis entries, you must assign them to the AA ledger document type from which the system creates cash basis entries.

To assign cash basis document types

  1. Locate the document type in the AA ledger for which you want to assign a corresponding document type in the AZ ledger.

  2. Enter the 2-character cash basis document type in the first two positions of the following field and click Enter.

    • Description -2 field

    You are not required to complete this field if you are using system-assigned document types, such as PZ.

Figure 2-1 Valid Document Types screen

Description of Figure 2-1 follows
Description of "Figure 2-1 Valid Document Types screen"

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2.5 Setting Up AAIs for Cash Basis Accounting

Cash basis accounting uses AAIs for the following types of transactions only:

  • Unapplied cash receipts

  • A/P and A/R balancing accounts

You must set up AAIs for these types of transactions to track cash basis entries properly. See Working with AAIs in the JD Edwards World General Accounting I Guidefor information about reviewing, setting up, and revising AAIs.

2.5.1 Unapplied Cash Receipts

When the system creates cash basis entries for receipts, it debits the bank account from the receipt and credits the revenue accounts from the invoices that apply to the receipt.

When you enter an unapplied cash receipt, however, you record the receipt without applying it against an invoice. When the system creates a cash basis entry for an unapplied cash receipt, it debits the bank account and credits a suspense revenue account. Later, when you apply the unapplied cash against an invoice, the system creates cash basis entries that debit the suspense revenue account and credit the invoice revenue account.

When you enter unapplied cash receipts, you must set up an AAI to direct the system to the suspense revenue account. The system uses one of the following AAI items based on the hierarchy shown to retrieve the suspense revenue account for unapplied cash receipts:

  1. CByyyy – The system searches for CByyyy (where yyyy is the G/L offset from the unapplied cash receipt). The system uses the Unapplied G/L Offset from the Customer Master Information table (F0301) or you can override the G/L offset when you enter the receipt.

  2. CBUC – If CByyyy is not set up, the system searches for CBUC. The system supplies UC as the default value for the G/L Offset field when it enters unapplied cash receipts without an offset.

  3. RCyyyy – If the system cannot locate CBUC, the system searches for RCyyyy (where yyyy is the G/L offset entered on the cash receipt).

  4. RCUC – If RCyyyy is not set up or if you do not use the G/L offset field, the system searches for RCUC. The system supplies UC as the default value for the G/L Offset field when it enters unapplied cash receipts without an offset. If the system cannot locate RCUC, an error message prints on the Cash Basis A/R Exception Data report (R03850).

2.5.2 A/P and A/R Balancing Accounts

You must set up the following AAIs to identify the A/P and A/R balancing accounts for differences due to taxes or balancing issues:

CBAP – Cash basis A/P balancing

CBAR – Cash basis A/R balancing

The system uses A/P and A/R balancing accounts when any type of VAT or use tax is included on a voucher or invoice. This does not apply for sales tax, (tax explanation code S). The system uses the balancing account entry to balance the cash basis entries as the expense/revenue account entry does not equal the bank account (payment/receipt) entry due to the tax amount it includes in one entry and not in the other.

For example, a company uses United States currency (USD) to create a voucher with use tax. The gross amount of the voucher is 100 USD, and there is a tax amount of 10 USD. The G/L distribution to the expense account includes the tax amount, therefore it is 110 USD. The AA ledger posting for the entry is as follows:

Voucher Entry Posting - AA Ledger

Expense A/P Trade Use Tax Document Type
110     PV 1
  100   AE 1

The tax amount will not be paid to the vendor, so the payment of the voucher will be for 100 USD. When the system posts the payment to the AA ledger, the entries are:

Payment Posting - AA Ledger

Cash Expense A/P Trade Use Tax Document Type
  110     PV 1
    100 10 AE 1
100       PK 2
    100   AE 2

When you run the Create Cash Basis Entries program (P09850), the system creates the entries as follows:

Title

Expense Cash CPAP AAI Document Type
110     PZ 2
  100 10 PZ 2

Note:

When using the Speed Voucher Entry - Multi-Company Offset program (P041016) for voucher entry, the cash basis entries do not use the balancing account, regardless of taxes. The entries will exclude tax and therefore will be in balance.

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