Cash and accrual basis
Most accounting reports in Upscale can be run on either basis. You can set which one your reports default to, and switch any individual report as you run it.
The difference
Accrual basis recognises income when you invoice and expenses when you are billed. It answers "how is the business doing", because it reports the month the work happened in rather than the month somebody got round to paying.
Cash basis recognises income when you are paid and expenses when you pay. It answers "what actually came in and went out". Many small businesses are taxed this way, and it is the basis that matches your bank account.
An invoice raised in March and paid in May appears in March under accrual and in May under cash.
How Upscale does it
Both views are recorded when the transaction is posted, rather than being estimated later by scanning documents. An invoice records the accrual side. Its payment records the cash side. Money movements that are true under both, such as a cash sale, are recorded once and count for both.
This is why switching basis is instant and why the two views always agree with each other. Products that derive the cash view at read time have to guess at partially paid invoices, discounts and credit notes, and different reports in the same product can end up disagreeing.
What changes
| Report | Effect of switching to cash basis |
|---|---|
| Profit and Loss | Income and expenses move to when money changed hands |
| Balance Sheet | Receivables and payables largely disappear, since unpaid invoices are not yet income |
| Trial balance | Reflects the same shift |
| Tax report | Output and input tax are counted when settled, which matters where you are taxed on a cash basis |
| Account transactions | Shows only entries relevant to the chosen basis |
What does not change
- Cash and bank balances. Money is money. It is the same figure on both bases, which is a useful check that the switch is behaving.
- Ageing reports. These are about what is owed, which is an accrual question by definition.
- Stock quantities and valuation. Physical stock does not care how you report.
- Reconciliation. A bank line is a real movement, always true on both bases.
Choosing a default
Set the default to whichever basis you file tax on. Run the other when you want the other question answered. Every report states which basis produced it, so a printed or exported copy is never ambiguous.