Announcement

Collapse
No announcement yet.

Transaction Dates vs. Banking Dates

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Transaction Dates vs. Banking Dates

    Hi,

    I'm having a small problem. I keep track of transactions through quickbooks, such as checks I wrote, transfering from one account to another, etc. The dates are wrong in my quickbooks compared to what the bank statements have.

    Example:
    I will write a check, 03/21/05 and enter it into quickbooks. When ever that check has been finally taken out of my bank account it's a couple days later. At the end of the week, I normally comb through my bank registry to make sure all the transactions match up, but it's very hard when certain dates don't match up.

    Am I doing it wrong? Should I keep the original date or use the dates in my bank statements? Thanks.
    Marc F.
    "Let the blind lead the blind... it's more fun to watch."
    ____
    QB Pro 2006

  • #2
    You should be entering the dates that you actually wrote the checks. They will most always be different than the date that the bank actually PAYS the check. You're not supposed to wait until the check clears the bank to record the transaction. You expense the amount when you Write the check.
    Joey
    www.casdelraybeach.com
    Certified Pro Advisor

    Comment


    • #3
      Ok Thanks. So no matter what transaction I do, I should keep with the original dates, in quickbooks.
      Marc F.
      "Let the blind lead the blind... it's more fun to watch."
      ____
      QB Pro 2006

      Comment


      • #4
        That's correct. You're not supposed to spend your life going back to see when each check cleared the bank.
        Joey
        www.casdelraybeach.com
        Certified Pro Advisor

        Comment


        • #5
          Entering cheques as they're written is the traditional accounting approach and has a number of advantages, eg it automatically throws up any that are not deposited, the cheque numbers and dates of payment that one normally writes on the bills paid with the cheques then tie up with the accounting records, etc.

          On the other hand, as you have found, there are advantages in entering the cheques as they appear in the bank statements, eg reconciling the bank account then becomes a breeze. In my view the only real risk of adopting this approach is that it fails to throw up cheques that have not been deposited. It is not even easy to check manually whether any cheques remain undeposited because the cheques do not appear in numerical order on the bank statements. Usually this doesn't matter much but it could matter a great deal, eg a lease may be cancelled or a contract lost because a payment was not received on time.

          As is so often the case with accounting, what suits one user may not be best for another. For example, I choose to enter cheques in the order in which they appear on the bank statement but most users will, I think, be wise to opt for the normal accounting approach of entering cheques as they're written.

          Ken

          Comment


          • #6
            I don't know about where you are, but in the US, the tax law here states that we write off the expense when we write the check, not when it clears the bank. So if a business has a large amount of checks that haven't cleared at the end of their tax year, it could cost them a lot of unecessary taxes because the check clears the first week of the next year.
            The same goes for credit card charges. They are expensed when you CHARGE the sales amount, not when you make the payment on the credit card.
            Joey
            www.casdelraybeach.com
            Certified Pro Advisor

            Comment


            • #7
              That's interesting.

              I'm in South Africa where the tax deductibility of an expenses is determined not by the date of writing the cheque or even actual payment but by the date of accrual - typically but not always the date of the supplier's invoice - so it makes no difference from a tax point of view whether one posts payments from the cheques or the bank account.

              But given the tax position as you explain it in the US, you are obviously quite right that the advantages of posting from the cheques rather than bank statements will be decisive for almost all users.

              Ken

              Comment


              • #8
                Well Ken, it's not quite that simple in the US. Some businesses are able to select their choice of cash or accrual methods of accounting when the business is established, and others are required to use accrual. Special permission from the IRS is needed to change accounting methods later. Most businesses with an inventory of goods for sale are required to use the accrual method. Many small businesses that do not have an inventory find the cash method advantageous and use it. But in no case are expenses considered recognized when the check clears the bank. The date the check is written is the date for cash basis, and the date the obligation is incurred is the effective date for the accrual basis.
                Sol slips beneath the waves and fades away amid majestic colors.

                QuickBooks Pro 2009 (formerly used 1999, 2002, 2004, and 2007 versions)
                Windows Vista Home
                I also use Quicken 2009 and TurboTax and more previous versions of them than I can possibly remember!

                Comment


                • #9
                  Then it sounds as though our tax systems are in fact similar. Our tax system also recognises cash basis accounting although the right to elect cash basis accounting was abolished some years ago and the few remaining taxpayers on cash basis accounting all made the election before the choice was abolished.

                  Which is more common in the US: cash or accrual basis accounting for tax purposes?

                  I take it that it follows that in the US it also makes no difference from a tax point of view whether one posts cheques from the cheque stubs as they are written or from the bank statements as they are cashed? If so, these taxpayers can make the choice on the basis of accounting/convenience factors such as those I mentioned.

                  Ken

                  Comment


                  • #10
                    Correction in last paragraph "... in the US in the case of accrual basis taxpayers it also makes no difference ...".

                    Ken

                    Comment


                    • #11
                      Most of your sole proprietors and those with no inventory use the cash basis of accounting. The IRS also passed new rules last year with respect to small businesses with small inventories no longer having to track inventory at all. I would advise checking with your professional tax advisor before making any changes though. What Sol said was true to a point but the smaller companies can select the Modified Accrual and they only accrue the bills that pertain to their inventory and the Accounts Receivable. They don't accrue every expense like a full accrual system.
                      Joey
                      www.casdelraybeach.com
                      Certified Pro Advisor

                      Comment

                      Working...
                      X