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    hatman6875's Avatar
    hatman6875 Posts: 3, Reputation: 1
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    #1

    Jan 20, 2009, 03:10 PM
    Cash or accrued basis?
    I am starting a small business and am having trouble deciding whether I should use cash or accrued basis.
    HELP?

    Thanks, Barry.
    de_de_gc's Avatar
    de_de_gc Posts: 66, Reputation: 4
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    #2

    Jan 20, 2009, 03:42 PM

    That decision is generally based on the type of business you are engaged in. What type of small business are you starting?
    hatman6875's Avatar
    hatman6875 Posts: 3, Reputation: 1
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    #3

    Jan 26, 2009, 09:35 AM
    I am starting a Service company. I will be doing service for both individuals and companies. So, I will be paid at time of service for the individual work and paid after the job is complete for jobs done for companies, etc.
    codyman144's Avatar
    codyman144 Posts: 544, Reputation: 31
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    #4

    Jan 26, 2009, 10:43 AM

    Accrual basis is more accurate but requires more work; cash basis is easier to figure out but doesn't really give you a true picture of your financial results.

    One thing to keep in mind is that you will file taxes on a cash basis. Therefore if you use the accrual method you will have to make adjustments at the end of the year for tax. You need to weigh the pro's and con's of each and decide for yourself.

    What kind of accounting software are you planning to use? Quickbooks?
    hatman6875's Avatar
    hatman6875 Posts: 3, Reputation: 1
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    #5

    Jan 26, 2009, 11:45 AM
    Yes, probably Quikbooks. I have used it the past on 2 other businesses I have run.

    Thanks again, Barry.
    codyman144's Avatar
    codyman144 Posts: 544, Reputation: 31
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    #6

    Jan 26, 2009, 11:58 AM
    Quote Originally Posted by hatman6875 View Post
    Yes, probably Quikbooks. I have used it the past on 2 other businesses I have run.

    Thanks again, Barry.
    Another thing to keep in mind is that QuickBooks will make the adjustments from Cash to Accrual basis for you. Also, I misspoke you can file your taxes on accrual basis but the vast majority of small business owners choose to file on cash basis for simplicity and other reasons. The first year you file you will have to pick a method on your Schedule C, but once you have picked one you need to stick with it in subsequent years.

    Thanks for the positive feedback, feel free to come back whenever you have more questions.
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