Clearing Payable and Receivable Balances in a Cash-Basis Balance Sheet

It is not unusual, when you display a cash basis balance sheet, to see balances in accounts payable and accounts receivable. This occurs when there is an unpaid balance and part or all of the item purchased or sold is a balance sheet item, e.g., a fixed asset, inventory item, etc..


There is an easy way to identify what your adjusting entry should be to clear A/P and A/R is as follows:

• From the QuickBooks menu, select “Reports/Custom Transaction Detail Journal.
• Select the “Filters” tab.
• Filter for accounts. Select “multiple accounts” and check accounts receivable and accounts payable.
• Select the reporting period.
• Next, select “Paid Status” and select “Open”
• Select the “Display” tab
• Select the columns you want to display in your report but always include “Split”, which is the account that is the balance sheet account(s) offset by the receivable or payable.
• For “Total by”, select “Account List”
• or “Sort By”, select “Split”
• Select the “Advanced” icon
• Select “Report Date” for “Open Balance / Aging”

You now have a detail of the balance sheet accounts making up the A/R or A/P balance, which you can use to create your journal entries to clear these A/R or A/P balance from the cash basis books.



It is important to remember, that your client is relying on their QuickBooks accounting for financial and management reporting in addition to tax. If you actually record your entries to adjust A/R and A/P in QuickBooks, your client’s accrual based books, including their open invoice and unpaid bills reports, will be incorrect.

Even is you post them on the last day of the tax reporting year and reverse them on the following day, the client is most likely to use year end financials in reporting to lenders and investors. I suggest you make these “off the books” in preparing a tax return.

Robert Guild is Advanced Certified QuickBooks ProAdvisor in Austin, TX who conducts CPE courses for CPAs and individual training and group classes to QuickBooks users. His company at www.QBCoach.biz, maintains a sixteen-station QuickBooks lab, providing hands-on training. You can contact him directly at rguild@QBCoach.biz or follow him on twitter at QBPro