Well, you might have been convinced that how easy the QuickBooks accounting software in use & must have decided to go ahead with your money and investment in the do it yourself bookkeeping program which they have persuaded you that even a learner can use it. As you open up that little green box and install it on your computer & enter a company name and then it stops being easy. QuickBooks asks a question “are you on a cash or accrual basis?”
So, firstly, you should know about cash and accrual basis accounting? If you have no idea then you can step away from the little green box.
But, you don’t need to be discouraged. You may still do your own books. You require just a little education & guidance upfront. The thing is, more thwarting than making a decision early which might hurt you later, or worse, spending hours on a project, finding out which you started from the wrong place & require doing it again.
5 points, which you should know before setting up your QuickBooks but it does not put in the box under “Read & understand before opening“:
1. Bookkeeping & Accounting are the recordings of every money related transactions within and outside of the company that is associated with products and services. From where did it come and where did it go. You are the director of this film & you can narrate it in a plenty of different ways.
2. Once you have chosen a perspective of telling your story whether it is a cash method or accrual method, you will require sticking with it.
3. The process of recording transactions in bookkeeping on a cash basis method is based on the theme when the cash comes and goes. Income is recorded while it is deposited. However, an expense is recorded when it is paid. Bookkeeping based on accrual method records income & expense while income or expense is accrued, it is not necessarily when the cash was received or spent. On the accrual basis income, it is recorded when you provide the services, not that time when you are getting paid.
4. Though, if you prepare your accounting in QuickBooks on an accrual basis, then you can always check your reports on a cash basis for the management purposes, while cash basis reports of bookkeeping cannot be checked on an accrual basis.
5. There are some certain requirements and suggestions for the specific types of business regarding the accounting process. Check with your accountant if you do not confirm that what method you need to use.