Switching Accounting Methods - Cash to Accrual
Please Read Before Continuing!
- Switching Accounting Methods is to be done by an outside experienced Auditor or CAM Accountant/CPA that has knowledge of the TOPS [ONE] application.
- We do not recommend switching accounting methods during a fiscal year. Best practice is to wait until year end to switch methods.
- Determine a single date for all new journal entries, and As of date to pull reports. This will ensure that everything is done correctly and without bringing issues to the new accounting method.
When converting from Cash to Accrual, there may be several accounts that need to be added to the Chart of Accounts before any other steps are taken.
- An Asset Account for the Receivables.
- Charges Codes can share the same receivables account, or each Code can have a unique GL account.
- A Prepaid Assessments account in the Liability Range
- They will be re-entered at the end of the conversion.
After the Accounting Method change is complete, the Required Accounts in the Accounting Setup need to be checked to ensure the Accounts Payable is assigned to the correct Liability account.
When converting from Cash to Accrual uncollected income needs to be recorded into the Receivables GL account for that charge code.
3. Pull up the Aged Owner Balance Report, if there is a balance, note the account number and amount.
If there are multiple codes listed, notate each account number and balance.
4. Create a Journal Entry for each code listed.
The account(s) listed in the aged owner report will be used as the Credit Account.
The Receivable Account will be used as the Debit Account.
If there is no Receivable Account, it will need to be added to the Chart of Accounts prior to creating these Journal Entries.
Prepaids in a Cash environment can be run through either a liability or an income account.
a) If the Prepaids were set up as a liability, no entries need to be made.
5 (optional). If the Prepaids were linked to an income account, a single Journal entry will be needed to move the prepaid balance from prepaid to the Liability Account.
To find the amount needed for the Journal Entry, pull the Prepaid Report, and notate the total at the bottom of the report.
Even if there are multiple prepaid codes listed, only one entry will need to be made for the total amount.
The Credit Account would be the Prepaid Liability GL account (a new GL account may need to be created).
The Debit Account will be the current Income Account assigned to Prepaid.
Change Accounting Method
6. Go to the Community Profile page, then scroll to Accounting Setup.
6. Under Accounting Settings, click Edit
7. Select Cash then Ok
8. Click Save
***This next step is crucial!!!***
9. Review EACH charge code GL account linkage to ensure the correct receivables account is assigned.
Community Page > Codes > Click Edit on each charge code.
Immediately after the accounting method changes, the receivable accounts for the Codes will be the same as the Income account.
10. Re-enter all canceled/deleted invoices.