Ingrid: Hi. I’m Ingrid Edstrom, Polymath, LLC and this is Penny of Penny’s Pies.
Ingrid: Penny, I’ve got some information that might be useful to you.
Penny: Oh, with my pie business?
Ingrid: Yup. Absolutely. Do you file your reports on cash basis or on accrual basis?
Penny: Uh. Cash. Because I understand cash and I’m not a very cruel person.
Ingrid: You’re not a very cruel person. Penny, do you know what accrual means?
Ingrid: I didn’t think so. The difference between cash and accrual is kind of like counting your chickens when they hatch or counting your chickens before they hatch. On cash basis, your reports populate for all the transactions when money changes hands. When you pay somebody cash or when you receive a check or when a credit card is swiped, money changes hands. On accrual basis, it’s when money is owed. It includes your open invoices and open bills from your vendors in your reports.
Ingrid: On accrual basis, if you run your reports on accrual basis, it includes your open invoices and open bills.
Penny: Oh, that makes sense.
Ingrid: Yup. Depending on the answers you need to your questions, cash basis or accrual basis might answer different questions.
Penny: Okay. Well, I’m going to look into that for my business now.
Ingrid: Yup, and if you’re still confused about cash versus accrual, you can check out our bookkeeping 101 seminar or ask us any other questions at Polymath.com.