Cohousing-L Mailing List: Re: Accrual or Cash Basis accounting in cohousing?

[Sharon Villines (sharon]

On Dec 14, 2025, at 8:59 AM, Diana Carroll via Cohousing-L <cohousing-l [at] 
cohousing.org> wrote:

> Roger, all the features you list below -- reports, invoice aging, payment
> tracking, etc. -- are features of Quickbooks or any other decent accounting
> software, not an aspect of accrual vs. cash based accounting.
> 
> We use cash based accounting at the recommendation of an accountant we
> hired for a consultation when we started up. I'm not an accountant, but it
> is my impression that cash based accounting is more intuitive for lay-folks
> like myself which is why it's the preferred method for small organizations.
> 
> Quickbooks lets you run accrual or cash based reports at any time, so the
> choice of cash or accrual is really just about how you file your taxes.

Ditto everything Diana says. I would add that accural accounting is only useful 
for large businesses that many accounts that have many payables and receivables 
in the future. Cohousing is essentially an "in the moment” operation. Budgeting 
and reserves are based on projected future income and expenses but there is no 
inventory to be depreciated and cohousing doesn’t continually have a negative 
cash flow from manufacturing now and being paid on delivery.

The difference between cash and accural is an interesting way to look at the 
valuations of the AI bubble. It is being questioned because of the way 
companies are reporting their income based on orders but not reporting “loans” 
as debts. Some of the AI companies are reporting huge contracts of $4 million 
but have also received $4 million in loans from the same companies. 

Using a cash basis, companies are emphasizing current income and bank balances 
and not future “loan” repayments which are in some cases accounted for as 
investments (which are not repaid). On an accural basis the reports would catch 
all the accounts to show that the company is looking great with $4 million in 
the cash account but will be bankrupt because they will be bankrupt in 6 months 
because they have to pay $4 million back plus paying all the operating expenses 
for 6 months. 

That sounds simplistic but corporate accounting gets so complicated you have to 
have a large team of forensic accountants to figure out what is going on. 
Remember Enron which had clean auditing records for years?

Sharon
----
Sharon Villines
Riderwood Village, Silver Spring MD
Following 25 years in Takoma Village, Washington DC