Wave offers both accrual and cash basis accounting methods for tracking your business income and expenses. By default, all reports in Wave are set to the accrual accounting method.
What is cash basis accounting?
Switch between accounting methods on your reports
Switch between accounting methods on your dashboard
What is accrual accounting?
Accrual accounting records all transactions, including those that are due but have not yet been paid. That means if you send an invoice in January but don’t receive the funds until February, accrual reports still show the money as being received in January.
Accrual accounting is used for:
- Accounts receivable, or income that is owed to you but you haven't received it
- Accounts payable, or expenses you owe
Cash basis accounting
Cash basis accounting records income and expense transactions once the funds have been received or paid. That means if you send an invoice in January and receive the funds in February, cash basis reports will show the money as received in February.
Cash basis accounting is used for:
- Cash transactions
- Credit card transactions
- Short-term and long-term assets
- Short-term and long-term liabilities
Credit card transactions are considered cash expenditures for tax purposes. This means that when you make your credit card purchase, the expense is recorded at that time.
The other assets and liabilities reflect activity based on cash transactions, even if there is no immediate impact on the income statement.
Switch between accrual and cash basis reporting on your reports
Both accrual and cash basis reporting are available on the: profit & loss statement, balance sheet, sales tax report, tags comparison report, trial balance, and account transactions report.
The cash flow report is only available in cash basis.
To switch between accrual and cash basis accounting methods on your reports:
- On the left-side menu, click Reports.
- Open your chosen report.
- At the top of the report, under Report Type, click the dropdown arrow and select Accrual or Cash Basis.
Click the question mark icon beside Report Types for more information about the two types of accounting.
Learn more about Wave’s reporting features in Video: Wave’s Reports Tour.
Switch between accounting methods on your dashboard
On your business dashboard, both accrual and cash basis reporting are available for your profit & loss graph, the expenses breakdown, and the net income graph.
The cash flow graph is only available in cash basis.
To switch the accounting method for all of the eligible graphs on your dashboard, at the top right, select Customize, then select accrual or cash basis.
Changing the accounting method updates all eligible charts at once. You cannot change just one chart by itself.
To view more information about a graph, click View report at the top right of the widget. The report will load with your chosen accounting method applied.