If you’re a regular QuickBooks user, you may have experienced a situation in which your Cash Basis Balance Sheet is reflecting Accounts Receivable and Accounts Payable balances. Though these balances should never appear on your Cash Basis Balance Sheet, they’ll occasionally be reflected there. This can be frustrating, but don’t give up – we’ve got tips on how to fix it.
If AR and AP balances are showing up on your Cash Basis Balance Sheet, it’s because you’ve entered AR and AP transactions into QuickBooks on the Accrual Basis (Which is recommended for business management), but taxes are being reported on a cash basis. QuickBooks was not designed to be used this way, and sometimes things won’t add up.
Your open AR and AP transactions that include balance sheet accounts as target accounts will create this issue. QuickBooks will include the target amounts in the Cash Basis Balance Sheet to keep it in balance, as well as including an offset amount in the source account of the transaction. If the transaction is an invoice, the source account is AR and the offset will appear in AR. If the transaction is a bill, the source account is AP and the offset is shown in AP.
In order to avoid this issue, you’ll have to be on the lookout for such situations.