How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Lane Your Own Question
Category: Finance
Satisfied Customers: 12009
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Type Your Finance Question Here...
Lane is online now
A new question is answered every 9 seconds

I have S corp file taxes on cash basis have bee doing

Customer Question

i have S corp file taxes on cash basis have bee doing several yrs to adjust accrual to cash I do ths a.r beg add to ncome a/r ending deduct from ending A/P use the same forumla
Sch M reflects adj Is this correct way, I add beginning because deducted prev yr
Submitted: 1 year ago.
Category: Finance
Expert:  Lane replied 1 year ago.



That works IF your AP and AR are both at the same aging ...meaning if you're simply pulling, say, one month back and one month forward it works.


But if your payable could go well into the next period and the receivables as well (especially if they are not of equal time periods - meaning takes say three months to collect receivables but you pay everything in one month - said differently, payment terms and payment experience varies) then you're not really converting back to what would have happened n a pure cash system


Does that make sense?

Customer: replied 1 year ago.

i use A/R balance 12/31/14 and add to book income and deduct 12/31/15 balance from book income.

I use A/P balance for 12/31/14 and add to expense and I deduct

12/15 balance of A/P from expense.

I reconcile book to tax on Sch income. I have been using this method for yrs I do nothing with each mo balances

Thank you

Expert:  Lane replied 1 year ago.

That'll work! ... IRS uses what they call substance over form ... as long as you're doing this consistently they would allow this on any audit.


I hope this has helped.


Please let me know if you have any questions at all.


If this HAS helped, I'd really appreciate a positive rating (using the rating request, faces, or stars on your screen)


That's the only way I'll be credited for the work here.


Thank you!


I hold a JD (Juris Doctorate, a doctoral degree in the law), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, retirement plan, Social Security & Medicare, estate, corporate & tax advice since 1986