How does ContactsLaw handle cash and accrual accounting?
ContactsLaw supports both cash and accrual accounting, with the ability to independently govern how GST is accounted for.
With respect to GST accounting, the accounting method (cash or accrual) determines how GST transactions are posted to the chart of accounts:
- In cash mode (the default), bills and creditor journals post GST to the Provision for GST controlled account. Debtor receipts and creditor payments journal GST from the provision account to the GST liability controlled account. In this way, no liability is incurred until a cash transaction occurs, however you can view the provision account to see a forecast of your likely liability.
- In accrual mode, bills and creditor journals post GST directly to the GST liability controlled account. Debtor receipts and creditor payments do not post GST. In this way, the liability is incurred immediately and the provision account is not used.
For all other (non-GST) accounting, ContactsLaw posts transactions internally on an accrual basis.
If using the accrual method for general accounting (the default), the balances and transaction listings on accounts will match the figures reported on the balance sheet and profit & loss reports.
The cash method for general accounting affects reporting only; hence the balances and transaction listings on accounts will not necessarily match the figures reported on the balance sheet / P&L report.