Cash Accounting in Easy Books

Submitted by mathew on Mon, 11/05/2015 - 16:53

Over the years quite a few people have asked me whether Easy Books supports cash accounting. I'm pleased to say that it now does. As I'm writing this the feature is only available in the beta version of the app but - all being well - it will be released soon.

What is cash accounting?

There are two methods in use. Accrual accounting is the most commonly used method but some businesses are able to use cash accounting. The difference between these two is when you declare income you've made.

  • Accrual accounting records your income at the date of the sale, regardless how much later your customer pays you.
  • Cash accounting records income on the date you receive the money. This might be thirty days after you invoiced your customer.

The same process happens for money you spend too, but only for expenses: assets you buy don't affect your profit figure.

One of the benefit of accrual (standard) accounting is that you can easily see the amounts owing to you from your customers and also how old the debt is. Easy Books shows the current balance of all your customer accounts in the Customers screen, so you can see at a glance how much is owed. It also contains a Customer Aged Debt report, which you can use to find out which customers are paying late and by how much.

But cash accounting has a big benefit too. It depends on your sales and expenses, but typically you can extend the time before you pay tax on earnings which is good for cash flow. Under the scheme any sales you make at the end of the financial year don't count as taxable income until they're paid.


If you choose to use cash accounting, Easy Books continues to keep track of account balances in the same way as it has always done. It shows amounts based on accrual accounting so you can still see all your transactions in all your accounts. You can still see the outstanding balances in your customer accounts. The only difference is in how the Profit & Loss report is displayed.

How does the scheme affect the report?

Firstly, figures for a standard profit and loss report are generated. Then Easy Books looks at the balances of all your customer and supplier accounts at the end of the report period. This gives the amount unpaid and means we can work back through the invoices until there are no more unpaid invoices. The invoices are used to reduce the original sale and purchase value of each income and expense account by the net amount.

If you have just moved from another accounting package at the end of the tax year and have entered opening balances for your accounts, it's a little harder for Easy Books because it may not have access to all the unpaid invoices. In this case it isn't possible to tell which income account a sale was linked to, so Easy Books will simply apply adjustments to one income account.

Any adjustments made are carried forward to the next financial period. If an invoice remains unpaid, the same adjustment will apply again, cancelling out the value brought forward. But it's still possible for you to run a P&L report over any arbitrary date range. If the starting date of the report matches the start of a period, the actual adjustments made previously are brought forward. Otherwise, adjustments are also made for the start date. This only becomes important when moving from one scheme to another. As an example, if you were using the accrual method in one period, consolidated the accounts and then changed to the cash basis, you would want the app to use the actual (zero) values at the start of the period because the income has already been declared. However, if you change the start date it could be that you want to know how profitable your business has been over that new range using the cash accounting scheme. So in this case Easy Books calculates the adjustments twice, once for the start date and once for the end date. The result is a true figure for the profit over the report dates using whichever scheme to choose.

The adjusted values are shown in the Profit & Loss report, and Easy Book also displays a table showing its calculations.

If you're looking to use cash accounting in your business, I hope you find the new feature works well for you.