Re: cash basis vs. accrual
From: Sharon Villines (
Date: Sun, 15 Feb 2009 06:54:26 -0800 (PST)

On Feb 9, 2009, at 9:00 PM, astromezzo [at] wrote:

For the most part it makes sense for us to operate as a cash
basis business, but occasionally would like to depreciate larger items
like our plow truck.

I'm not sure why cash basis precludes depreciation, but I'm not an accountant. I thought depreciation was a tax deduction determined at the end of the fiscal year.

Cash vs accrual, I thought had to do with monthly accounting. So when the money paid for the plow truck is paid, it appears on the books in the cash method when it is paid. If it is paid in installments, it appears when each payment is made. In the balance sheet the remaining cost would appear as a debt/liability and deducted from the assets.

In the accrual method, the cost appears when the money is committed, whether actually paid or not. A plumbing bill for $456 and a commitment of $1234 for more work are both entered as spent when the commitment is made, not just when the bills are paid. If it is to be paid in installments, the installments would be entered in each month the money is due because that is when it was committed.

We use cash accounting but for the last year, I kept a second set of accrual books for the facilities team because it was the only way to really see what was happening with our budget. Bills from vendors can come in 2 months after the work and the management company can pay them a month (or event two) after that.

The balances the management company sends us are for budget lines, not specific vendors or jobs -- it's not clear what is included. They are just money in and money out. Tracking how much money we have left is difficult with a cash basis method.

At the end of the year, in terms of income taxes, I'm not sure why it makes any difference, although I know the Schedule C tax forms do ask. I hope someone else can explain this.

Sharon Villines
Takoma Village Cohousing,Washington DC

  • cash basis vs. accrual astromezzo, February 9 2009
    • Re: cash basis vs. accrual Sharon Villines, February 15 2009

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