Cash basis accounting is an accounting method that recognizes revenue when cash is “received” and expenses are recognized, when cash is “paid” out. This particular accounting method shows only cash that is actually received or disbursed during a particular accounting period. The Cash Basis Accounting is in contrast to the Accrual Basis of Accounting, where revenues are recognized when they are “earned” and expenses are matched to revenues or the accounting period when they are “incurred”. So even though Cash Basis Accounting may not be in compliance with accounting's matching principle, it is relatively simpler than the Accrual Basis Accounting and might be required to use due to a requirement in an oil well lease, venture capital, or partnership.


The timing of receipts and disbursements might differ from the period of operating activities. Therefore, the period during which cash basis transactions are recorded might differ from the period during which transactions are recorded for accrual accounting.


The JD Edwards EnterpriseOne product by default maintains Accrual entries in the AA (Actual Amount) ledger. When you use Cash Basis accounting, the system generates parallel transactions from the AA ledger and updates the AZ (Cash Basis) ledger.


Understanding Accrual Entries


Transactions involving the receipt and disbursement of money occur as receipts and payments in the EnterpriseOne Accounts Receivable and EnterpriseOne Accounts Payable systems. For accrual entries, the system creates debits and credits to the bank account in the F0911 table for these batch types:


  • K: Automatic payments
  • M: Manual payments with match
  • W: Manual payments without match
  • RB: Receipts

 

The system creates the entry as one sided with a document type of PK, PN, or PT for Accounts Payable and RC or RK for Accounts Receivable. It then creates a balancing entry in the accounts payable and accounts receivable trade accounts with a document type of AE automatic entry. Because the system creates both documents in the same batch, the batch is in balance and can be posted without error.


Understanding Cash Basis


In order to determine the best business practices, you must understand how the system creates cash basis entries for the JD Edwards EnterpriseOne General Accounting, JD Edwards EnterpriseOne Accounts Payable, and JD Edwards EnterpriseOne Accounts Receivable systems.


The Create Cash Basis Entries program (R11C850) always creates cash basis entries for Account Ledger transactions, regardless of the batch type, and then launches additional programs to create accounts payable and accounts receivable balancing entries for batches K, M, W, and RB.


For payments (Accounts Payable transactions) and receipts (Accounts Receivable transactions) , the system:


  • Excludes general ledger transactions for the corresponding expense and revenue accounts because those document types (such as PV and RI) are in UDC 00/DX.
  • To balance the cash basis entry, the system automatically runs the Create Cash Basis Entries - A/P (R11C854) and Create Cash Basis Entries - A/R (R11C853) programs to retrieve the expense and revenue accounts.

 

  You can run Cash Basis program (R11C850) to create cash basis entries in following ways:


  • Running R11C850 independently from menu or batch versions


When you setup cash basis accounting for the first time, you should run the Create Cash Basis Entries program from the menu instead of from the General Ledger Post program. All transactions that were previously entered must be processed for cash basis accounting; therefore, the program requires additional processing time and might run more efficiently during off-peak hours. If you create cash basis entries periodically, such as weekly, monthly, or quarterly, you can control when to create cash basis entries by running the Create Cash Basis Entries program from the menu or batch versions independently.


  • General Ledger Post Report program (R09801) calling Cash Basis (R11C850)


After you create cash basis entries, you can ensure that your AZ ledger has the most up to date information as cash is received or disbursed by activating a processing option in the General Ledger Post program (R09801) under the Cash Basis Tab. To activate the cash basis processing option, you designate the version of the Create Cash Basis Entries program that you want to run. You can activate the cash basis processing option in versions of the General Ledger Post program for these batch types only:


    • G: General ledger
    • K: Automatic payments
    • M: Manual payments with match
    • W: Manual payments without match
    • RB: Cash Receipts


For more information on Cash Basis Accounting setup, detailed examples of how cash basis records are created for cash receipts and manual payments, please refer to the following KM documents:


  • Overview of Cash Basis Accounting (Doc ID 1458454.1)
  • Frequently Asked Questions regarding Cash Basis Accounting (Doc ID 1462188.1)