View source for Cash Based Accounting

Some countries allow the much simpler cash based accounting at least for smaller companies and private persons, while GnuCash up to now (2.4.x) only supports accrual accounting, if you use the invoicing feature of the bussines module.

==What Is Cash Based Accounting==
The difference: In '''accrual accounting''' the income - and expense - is realized, when the invoice is ''posted'', while in '''cash based accounting''' it is realized at the date of ''payment''.

For that reason the reports need a review as some of them need adjustments.

==Cash Based Income Statement==
I posted to the dev list with regard to sponsoring the development of this report.  This seems to be a recurring problem/topic/request as demonstrated by the few mailing-list posts I found:
*http://lists.gnucash.org/pipermail/gnucash-devel/2003-May/009125.html
*http://lists.gnucash.org/pipermail/gnucash-user/2010-July/035854.html
We have been using gnucash for a while and it seems to always cause a problem around tax time for our accountants.  As I am not an accountant and I do not know anything about scheme, I would like to see if based on community input I can garner a requirement spec that solves this long standing issue in a report and then assuming it is a reasonable expense we can pay for the creation of the report.

:As far as I understand the problem with the current business mechanics, an invoice posted this month and payed next month is reported as income in this month. This would be correct for ''accrual accounting'', but wrong for ''cash based accounting'', where it should become income next month.

:This affects not only the Income statement, but also [https://bugzilla.gnome.org/show_bug.cgi?id=95700 Bug #95700: accrual and cash sales tax (VAT/GST) reporting in business invoices], other reports and the CoA.

:To implement an cash based accounting feature, we would need:
* An option ''accounting is cash based'': It should be per file, because one user could own different companies with different rules here. Backward compatibility would say, it should be false by default, but I assume, (at least) most (new) users wish cash based accounting. Eventually we should set it in the account templates to true, so it would be the default for new files.
* A quick way, to decide if income/expense are realized or pending. There are 3 possibilities to decide this:
** Scan the path of transactions:
*** It is quite clear, if the counter accounts are current assets like cash or bank. 
*** I am not sure, how to handle credit cards in a) US and b) other countries. 
*** For A/P and A/R accounts one had to check, if there is a corresponding payment in the time range of question. Do we have a function for this?
** Use separate accounts for unrealized income/expense.
*** E.g. the account templates in Germany have separate accounts for ''tax undue x%''. Here the payment process should move the tax amount from ''tax undue x%'' to ''tax due x%''
*** OTOH it would be hard to duplicate more complex income/expense hierarchies.
:Requesting for comments of other devs and users, --[[User:Fell|Fell]] 03:51, 1 April 2011 (UTC) (No joke)
** Use the Lots to determine if an invoice/bill has been paid.  Following the Lot from invoice to payment lets you not only know if it's been paid, but when.  The only significant challenge here is partial payments.  If an invoice has only been partially paid it's harder to determine which portion of the payment should be applied to tax.
===Features===
As a way to sharpen the requirements, we should start a list of specific features here:
*From a display perspective, it should mirror the accrual income statement


===Comments===
*Thank you for your input.  I have a few questions though.
**It seems you are proposing a change to the accounting system.  Is this necessary?  
**Couldn't the a report just pull from different date fields and determine when the money actually hit the accounts, thus building a cash based report?

==Balance Sheet==
Also the balance sheet needs adjustments. [http://lists.gnucash.org/logs/2011/04/2011-04-12.html#T10:19:35]