Hi Martijn, Gnucash is capable of supporting both cash and accrual accounting. The business features (accounts receivable and accounts payable) are explicitly accrual accounting based however as they record the income at the time the invoice is created normally on the date the service is rendered to the client.
The difference is primarily one of the date of the recording of the transaction. In accrual accounting the timing of reporting the transaction in your accounts is set primarily by when the transaction is entered into i.e. when the agreement to perform the transaction is reached whereas cash accounting is based on when the cash actually changes hands which, as in your case can frequently, be some time later. To do cash accounting in Gnucash you would have to not use the business features and only record the transaction in your accounts when the payment is received from the medical insurers. This would require a separate system for recording your invoices to customers. It would be possible to maintain two sets of books one on a cash basis and the other on an accrual basis but this would require a lot of extra work. Whether you can use cash accounting will normally be determined by the business and tax legislation in your jurisdiction(country). Some jurisdictions have a threshold in turnover, below which you can apply to use cash accounting and some require use of accrual accounting. Writing off the balance of the invoice seems like a reasonable approach after receiving the medical insurance payment if the balance is uncollectable. Again your local business and tax legislation can impact on how this should be done and when and it would be a good idea to consult an accountant locally who is experienced in your industry about how to best handle this in your jurisdiction. Have you looked at other reports other than the P&L e.g. Cash Flow to give you a better idea of money flow particularly from a business management point of view rather than just the tax perspective. Your account of the treatment of a business loan is correct with regard to the tax treatment in most juridictions. The principal component of the loan repayment is still taxable as income. The principal component is recorded as a reduction in the liability the loan represents to the business. As this matches the reduction in assets that the principal component represents, it does not affect your equity in the business. Income and expense accounts are in practice temporary equity accounts used to record the change in equity during an accounting period and as this component of the loan repayment transaction does not result in a change in equity it does not appear in the expense account. Another way of looking at it is that when you first take out the loan, your bank account balance is increased and the liability account for the loan is correspondingly increased, so there was no resulting change in equity associated with taking out the loan amount for the principal. This means there should no change in equity in repaying the principal. The interest component however is not balanced by any change in equity when the loan is taken out which is why it appears as an expense (a reduction in equity in the current acoounting period). I hope the above makes it clearer rather than further confusing the issue. David Cousens ----- David Cousens -- View this message in context: http://gnucash.1415818.n4.nabble.com/Cash-Method-and-write-off-s-tp4692826p4692932.html Sent from the GnuCash - User mailing list archive at Nabble.com. _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org https://lists.gnucash.org/mailman/listinfo/gnucash-user ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
