How does being on a cash basis affect AP processing?
- 02 Jun 2023
- Contributors
- Print
- DarkLight
- PDF
How does being on a cash basis affect AP processing?
- Updated on 02 Jun 2023
- Contributors
- Print
- DarkLight
- PDF
Article summary
Did you find this summary helpful?
Thank you for your feedback
FASB accounting requires accrual based accounting, but we are on a cash basis. How does FIMS handle Cash basis accounting in the Accounts Payable Module?
Answer:
If the accrual flag is turned off in the System Initial Setup record, when you post a voucher in AP there is no posting to the GL, but the voucher does post to the Open Items tab.
If you leave the accrual flag off and are cash basis when you post a payment, you get a debit to the expense account and a credit to cash.
If you notice the accrual flag is off and turn it back on, when you post the payment you get a debit to the payable account and a credit to the checking account.
If there are no Fund class defaults for the payable ( which isn't needed if cash basis), you would get an error when trying to post the payment once you turn the flag on and you would have to turn off accrual accounting before posting. **E G/L Accounts for Prepaid doesn't exist in original voucher might be the error.
If your intention is to switch from cash to accrual, then you will need to process journal entries in the GL to set up the payable balances for the open payables and then modify the existing open payable items found on the Open Items tab.
To correct the error found above when switching to accrual, log in as NPO and fill out the fields on the voucher history line items tab that are missing.
If you didn't create journal entries to set up the existing payable balances, after posting the payment, you will need to either change the debit to the expense account from the payable before posting in the GL, or do a manual journal entry to remove the liability and recognize the expense.
If you leave the accrual flag off and are cash basis when you post a payment, you get a debit to the expense account and a credit to cash.
If you notice the accrual flag is off and turn it back on, when you post the payment you get a debit to the payable account and a credit to the checking account.
If there are no Fund class defaults for the payable ( which isn't needed if cash basis), you would get an error when trying to post the payment once you turn the flag on and you would have to turn off accrual accounting before posting. **E G/L Accounts for Prepaid doesn't exist in original voucher might be the error.
If your intention is to switch from cash to accrual, then you will need to process journal entries in the GL to set up the payable balances for the open payables and then modify the existing open payable items found on the Open Items tab.
To correct the error found above when switching to accrual, log in as NPO and fill out the fields on the voucher history line items tab that are missing.
If you didn't create journal entries to set up the existing payable balances, after posting the payment, you will need to either change the debit to the expense account from the payable before posting in the GL, or do a manual journal entry to remove the liability and recognize the expense.
Was this article helpful?
