Cash-Basis vs. Accrual Accounting

GlobalWare offers two types of accounting: cash-basis and accrual. The difference is primarily in how settlement Invoice items are handled. In both types, tracking items are handled on a cash basis (revenue is recognized when commission is received), and ARC and Direct items are handled on an accrual basis (revenue is recognized at or close to point of sale and receivables are created). For Invoice settlement, cash-basis accounting recognizes revenue when cash is exchanged, while in accrual revenue for invoice settlement is recognized at point of sale.

Note: If you use cash-basis accounting, it is very important when you call product support to tell the GlobalWare product support representative that you use cash-basis accounting.

Revenue

• For settlement types Invoice and Tracking, cash-basis accounting does not record revenue until you recognize commission, either by receiving a commission check for a plastic item, or withholding the commission amount when paying the provider for a non-plastic item. The exception to this is service fees, because you do not pay a provider. For service fees, revenue is recognized when the customer pays you.

  For ARC and Direct settlement types, GlobalWare recognizes revenue when you settle.

• Accrual accounting recognizes revenue for Invoice, ARC, and Direct settlement sales on the AR Due Date on which you post invoices. For Tracking, revenue is recognized when you receive commission.

AR, AP, and Sales

• With cash-basis accounting, ARC/Direct Settlement posts accounts receivable and accounts payable (and revenue) to the general ledger for ARC and Direct items. Post Gross Sales to Accounting posts sales to the general ledger. Posting customer receipts posts accounts payable to the general ledger for settlement type Invoice items. Posting checks to providers posts revenue for settlement type Invoice items. Posting checks from providers posts revenue for plastic, settlement type Invoice items.

• With accrual accounting, the Post Invoices function posts accounts receivable, accounts payable, and sales (and revenue) for ARC, Direct, and Invoice items, and sales for tracking items. Invoice plastic items post to commissions receivable; Invoice non-plastic items post to accounts payable.

  Customer receipts and checks affect accounts receivable. Provider checks and receipts affect accounts payable or commissions receivable for non-plastic and plastic items respectively.

Chart of accounts A/R customer and A/P provider in cash basis accounting

• The Processing Table for cash-basis accounting for Retail Invoice entries has the accounts payable chart (usually 2020) under the A/R column, whereas accrual has the accounts receivable chart (usually 1510).

  In accrual accounting for retail, invoice, non-plastic items, Post Invoices creates a receivable and a payable. A customer cash receipt for the item creates the offsetting receivable, and a provider check creates the offsetting payable. In cash-basis accounting, a customer cash receipt creates a payable, and a provider check creates the offsetting payable (no receivable is ever created).

• Receivable settlements type Invoice do not post to accounts receivable customer (usually 1510). Therefore, the amount in accounts receivable customer will not match the Aged Accounts Receivable list. To review the items that do not post to accounts receivable customer, run the Accounts Receivable Report (By G/L Account). The items in question appear in the Invoice column.

Write checks

• Cash-basis accounting gives you the option to pay the net (amount minus commission) or gross.
• Accrual accounting does not offer the option to pay gross.