I am the Treasurer for a non-profit, Gems of Hope Inc. Our accounting is on a
cash basis not on an accrual basis. We have used the invoicing process; however I am having difficulty
in understanding the accounting transactions using this process. My understanding is the invoice should be a debit to an accounts receivable account not to the cash account. Once we would receive payment the accounts receivable account would clear and then the cash account would increase. Is there any way to have the invoice post to an accounts receivable account instead of a service account (we do not use the product/service list in QBs)? Just trying to understand the accounting side of this process. Right now the QBs balance is reflecting about 20K over the bank balance.
Hi Sue, thank you for your questions. QB does the accounting for you in the background based on the products and/service items that you have set up. When you set up a product/service item in QB, you assign an income account to that item; when you use that item on an invoice QB will debit accounts receivable and credit the income account that you have assigned to the item you have billed your customer for.
When an invoice is paid, the following accounts are impacted:
Credit Accounts receivable
If you are on a cash basis, then select “cash” basis for all of your reports.
You can also check the following QBO video tutorials:
How to create and send invoices: https://fitsmallbusiness.com/send-an-invoice-through-quickbooks/
How to set up the products/services list: https://fitsmallbusiness.com/set-up-products-and-services-list-quickbooks-online/
Thank you for reading!