Change accounting methods

Sage Intacct lets you select your accounting method—accrual, cash, or both. If you select both Accrual and cash, Intacct records transactions in separate journals "behind the scenes" so you can later report on either basis. For example, you can run a balance sheet report on an accrual basis and then run the same report on a cash basis.

Why change accounting methods?

There can be a number of reasons to change accounting methods. For example:

• An organization that's had (or expects) significant growth and wants to change from cash-based to cash-and-accrual-based accounting
• An organization that's been happy with accrual-only based accounting but wants the deeper insight that cash-and-accrual-based accounting can provide.
• An organization that generally runs reports in one or the other method has acquired other entities and wants to incorporate both accounting methods.

Explanation of accounting methods

Your Intacct administrator can select your accounting method as part of the General Ledger Setup.

Accounting methods

Accounting method	Description
Accrual	All transactions are included in reports, regardless of whether cash inflow or outflow was part of the transaction. For example, bills appear in accrual basis reports even when unpaid. All journals and reports are Accrual. Good choice if you’re required to report on an Accrual basis.
Cash	Transactions appear on reports only when cash impact occurs (in or out). For example, bills are reflected in cash basis reports only when paid. All journals and reports are Cash. Good choice if you always report on Cash basis. Cash is available only for new Intacct companies.
Accrual and cash	Gives you the flexibility to generate reports using either accounting method or reporting and can then decide on a report-by-report basis which method to use. For reporting, the company might: Set the accounting method to Accrual and cash. Select Accrual as the default for reporting. This saves time if most reports will be run on accrual basis. Override the default, selecting Cash on the filters tab when needing to report on a cash basis.

Before you change methods

You can change your accounting method from the cash method or the accrual method to the multi-book accrual and cash method. Changing from accrual and cash to cash-only or accrual-only is not supported.

This change requires more than just changing the selection on the General Ledger configuration page. For example:

• Complete an analysis of your journal configuration to ensure that your setup is prepared for the change because Intacct will make journal updates that cannot be undone.
• Changing accounting methods is not retroactive: in addition to configuration, you'll need to align your expectations about how reporting will work after the change.

• If you have future-dated transactions that were entered before changing accounting methods, those transactions will not be retroactively updated.

  To ensure proper accounting for future-dated transactions entered before the change, consider taking 1 of the following steps:

  • Remove the future-dated transaction before changing the accounting method and then recreate them after.

  • Record adjusting entries for the future-dated transactions to reflect the updated accounting method.

• Transaction processing should cease while the change is being made.
• While Intacct will adjust some existing journals, you'll need to add other journals manually. The specific journals that you need to create depends on the method you're moving from. For example, you change to a multi-book cash and accrual method from the accrual method. You’ll need to add journals tied to the Cash method for Accounts Payable and Account Receivable and for other areas affected such as Order Entry, Employee Expenses, and so on.
• Further configuration steps are needed in some application areas, such as Accounts Payable and Accounts Receivable, to connect to the journals that have been created. Accomplishing the setup correctly will ensure accurate reporting.
• Ensure that no journals are selected in your bank accounts, because those will also be updated.

• When importing historical journal entries to account for legacy data, consider that data is now separately gathered for each accounting method with regard to opening balances. Thus, data imported must designate the accounting method impacted through the selection of the correct journal (associated to Cash or Accrual). This ensures that all history is accurately captured in both reporting books. If you're converting from Accrual to Cash and Accrual, you’ll import Cash Basis opening balances because you already have the accrual opening balances.

• Bank register reporting requires special attention: when you make the switch, the bank register pulls in the activity posted in both reporting books, essentially duplicating the numbers. In this case, 3 journal entries are needed to correct the bank register. Also note it's recommended that this change only apply at the end of a reconciled period.

• Integrations posting journal entries will also be impacted. Be sure to consider what integrations you have in place and how they will be configured going forward.

Transaction entry

In most cases, entering transactions is the same, regardless of accounting method. For example, users entering a bill do not need to know whether the transaction is accrual, cash, or both. Intacct handles the posting to accrual and cash journals "behind the scenes."

However, entering a journal entry directly in the General Ledger requires that you consider the accounting methods that should be affected and select the appropriate journal accordingly.

Change your accounting method

Creating the ability to report on either accounting method involves the following steps:

• Enable the feature

• Provide a cut-over period

• Create the cash-basis or accrual-basis journals

• Select the journals in the appropriate application configuration areas

Applications that are impacted by this feature include General Ledger, Accounts Payable, Accounts Receivable, Cash Management, and Expenses. This change can also impact integrations. Evaluate them separately according to how the integration is designed for data to flow.

Prepare for the change

1. Best practice is to close the books as of the cut-off month and work as if you're switching to a new system as of that date.
2. Verify which applications your company is subscribed to by going to Company > Subscriptions. For each application, select Configure.

3. Have other users stop processing transactions.

4. Verify that all bank accounts (checking accounts, credit card accounts, and savings accounts) do not have a journal assigned.
5. Change any other applications and an integration related setup areas as needed.

Make the change

1. Enable Accrual and cash in the Configure General Ledger page.
   • After enabling cash and accrual, Intacct begins booking dual entries immediately.
   • Select your default account method for reporting.
   • Go to General Ledger > Setup > Journals and confirm that no current journals have been converted to Cash and Accrual. All journals should still use the original reporting method.
2. Create a new set of journals that are Accrual, Cash, or both Accrual and Cash. For example, use the ID and descriptions:
   • APJA–Accounts Payable Journal–Accrual
   • APJC–Accounts Payable Journal–Cash
   • ARJA–Accounts Receivable Journal–Accrual
   • ARJC–Accounts Receivable Journal–Cash
   • CD–Cash Disbursements Journal–Cash and Accrual
   • CR–Cash Receipts Journal–Cash and Accrual
   • EEJA–Employee Expense Journal–Accrual
   • EEJC–Employee Expense Journal–Cash
   • EED–Employee Expense Disbursements Journal–Cash and Accrual
   • GJC–General Journal–Cash
   • GJCA–General Journal–Cash and Accrual
   • Update the name of the GJ from General Journal to General Journal–Accrual
   • IC–Intercompany Journal–Cash and Accrual
3. If your company is a multi-entity shared company, update Multi-Entity Management to specify the new inter-entity journals.
4. Go to each application's configuration settings and assign the newly created journals to it. You should be able to tell which journal to assign by its name.
Do not reassign the previous journals. Assigning the previous journals can inadvertently mix transactions posted on different methods and impact reporting adversely.
5. Create an opening balance journal entry to have an opening balance in the new book. For example, if the company was previously accrual only, create an opening balance to a journal that affects cash books only to ensure reporting going forward.
   When you change the Accounting method from Cash to Accrual and Cash, Intacct creates multi-book journals (such as Cash and Accrual book journals). However, Intacct has only transactions for Cash book journals, so it will default the reporting method to Cash.
6. Go back to the Configure General Ledger page and refresh the page. Then change the default reporting book.

On the Journal Information page, there's a new option to select whether to Include this journal when reporting in Accrual, Cash, or both.

During the transition, you also make a journal entry to correct your books in a journal that has a reporting method that's the opposite of your previous reporting method. In other words, if you were accrual based before the change, you need to make a journal entry to eliminate payables, receivables, expenses, and revenues in a cash-basis journal.

Handle corrections after the accounting method is changed

Sometimes after changing to a new accounting method, you discover the need to make a correction to a subledger journal entry that was created before the change.

After the accounting method is changed, create an adjusting entry. Void and reclassify are no longer supported for previous entries.

Learn about adjusting entries.

Set up reports

When you create reports, you have the option to override the accounting method that you selected as the Default for reporting in your General Ledger Setup.

In the Filters section for financial reports and other General Ledger reports, use the Reporting Book option to select either:

• Accrual
• Cash
• A consolidation book that's Accrual or Cash (for Global Consolidations companies only)

The following table describes where to find the Reporting Book option for each type of report.

Type of report	Steps
Financial reports	On the Filters tab of the financial report, select the Reporting Book to use (Accrual or Cash).
Other General Ledger reports	In the Filters section of the report, select the Reporting Book.