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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16580
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I have been wondering how to record accounts receivable

Customer Question

Customer: Hi! I have been wondering how to record accounts receivable for cash basis tax payers. I'm wondering why accounts receivable can't stay on the balance sheet?
JA: Thanks. Can you give me any more details about your issue?
Customer: I'm an CPA Candidate and I'm being told cash basis tax payers can't show accounts receivable on tax returns. If I can't then what do I do with recievables
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Submitted: 1 year ago.
Category: Finance
Expert:  Megan C replied 1 year ago.

Thanks for your question. Basically, under cash basis accounting you would only record revenue when the cash is collected. Accounts receivable occur when you provide a good or service, but are not paid. You would not claim the income.

Basically what you will have to do is convert the books from accrual to cash for tax purposes. This is completely standard for many small businesses, depending on their industry. Ditto on their accounts payable -- however, remember that if you pay with your credit card you can deduct the expense that year.

For the cash tax books, you would not have accounts receivable -- because you do not recognize the income until it is collected.

Please let me know if you need anything additional. If not, please rate positive.