Accrual Basis Reporting

Introduction

In Accrual Basis Accounting, income and expenses are recognized when incurred/entered, and revenue is recognized on the income statement when the transaction occurs, i.e. the invoice is created, for a particular period of time.

For income, for example, this includes anything that you’ve billed out to your clients, regardless of whether they have yet paid their invoice. Expenses are also affected, because they include vendor bills (for example those that you keep track of in Accounts Payable) regardless of whether you have paid them.

The balance sheet is also impacted because both accounts receivable and accounts payable are acknowledged as assets and liabilities, respectively. 

The following are examples of how your reports are affected, especially in comparison to Cash Basis Accounting. 

Profit & Loss

In Accrual Basis Accounting, the Profit & Loss (Income Statement) report will include the following:

  • Fee Income – will include all paid and unpaid invoices
  • Expenses – in addition to recorded transactions, this will also include any bills you’ve recorded in the Accounts Payable section in CosmoLex – regardless of whether you have marked them paid

Learn more about the Profit & Loss report

Balance Sheet

The Balance Sheet provides data on what the firm owns, what it owes, and the firm’s net worth. In Accrual Basis Accounting, the Balance Sheet will include the following:

  • Accounts Receivable – shown as an Asset 

  • Accounts Payable – shown as a Liability 

Learn more about the Balance Sheet report

Learn More

Cash Basis Reporting

Updated on August 29, 2018

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