RE: QB cannot calculate accurate cash basis income when using that method.
I guess it depends on what you mean by accurate/what your expectations are, and what problem you're seeing. Notably, QuickBooks cash basis reporting is not the same as not cash flow.
- It is true that, in the case of a down payment for a future sale/job, where nothing is yet earned, the down payment applied to the retainer invoice will not appear as income on either basis. This is appropriate, I think, when accepting a down payment for a sale that has not yet been delivered (and may not ever be, really).
Consider the case of a hotel that requires a pre-payment for the first night's say of a fully refundable booking. Is that cash basis income? I suspect not because a) the booking is for a thing in the future that hasn't been 'delivered' yet, and b) the customer can cancel and receive a full refund.
- Notably, a similar case where there is a prepayment applied to a future invoice, cash basis income will not show up on the payment date, but instead on the invoice date. The pre-payment is not considered earned until the invoice date (the latter of the invoice or payment date is used).
- When the second invoice is recorded and the 'retainer' item is used to pay down the invoice, that will create income on a cash basis as of the second invoice date. That can be inappropriate, but isn't in this case, I think, because the item represents the pre-dated payment and not some sort of random non-cash adjustment.
What do you see as inaccurate when using the retainer method?
RE: Also, for whatever reason, QB doesn't calculate the Gross Total on the sales tax liability report correctly with that method.
It seems that the taxable total will not change if the 'retainer' item is a non-taxable item. I'd expect the Gross amount to be the sum of the taxable and non-taxable amounts, and so in this case less than the taxable amount - because the non-taxable amount is a reduction in the sale. Are you seeing something else? (And as an aside, why do you care about the Gross amount?)
