We've scoured our resources to offer a cash-based accounting workaround to Wave's accrual-based system.
When you create an invoice in Wave, your Accounts Receivable is debited and increased on your balance sheet. Also, the income account you have chosen is credited on your income statement. Once payment is made on that invoice, Accounts Receivable is credited (decreased), and your bank account balance is debited and increased. Notice how when the payment is made, there is no effect on your income accounts.
From one of our Wave Pros, Ron Mills, here is his response to Cash Basis in general in Wave:
In the US, many/most small businesses are on the cash basis for tax reporting purposes. But, the accrual basis does give a much more accurate depiction of the company’s financial position.
I know it’s not ideal. But, you can either (1) keep only your cash transactions on Wave and manage your accounts payable and accounts receivable separately. Or, (2) you can manage your business using Wave on the accrual basis. And, when tax time rolls around, it’s a pretty quick journal entry or two that will adjust your books to the cash basis... If you have an accountant who does your taxes, he/she should be able to make these entries for tax purposes without a whole lot of effort. It’s pretty standard really.
What I would say is that if you don’t have a whole lot of A/R and A/P and need to be on the cash basis, just record the transactions in Wave as the cash transactions occur and keep track of your receivables and payables another way.
And, if you have a large number of Accounts Receivable and Accounts Payable, my advice would be to account for them within Wave. The accrual method of accounting for these really does give you a much more accurate reflection of where your business stands. The cash basis is probably only used for tax purposes. A standard entry(ies) can be made purely for tax purposes when your taxes are being prepared or any time you need to see where you stand with your taxes.
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