Cash Basis accounting registers were updated in 2025 to align with the American Institute of Certified Public Accountant’s (AICPA) “modified cash basis”, simply referred to as “cash basis” by the accounting profession. This method of accounting is recognized as an Other Comprehensive Basis of Accounting by the AICPA, and is not governed by the Financial Accounting Standards Board, SEC, or International Financial Reporting Standards (IFRS). It is a method that allows more simplistic accounting flow than in the accrual basis of accounting.

Cash versus Accrual

Cash basis accounting is an accounting method that records revenue and expenses at the time of cashflow. This method differs from accrual, where revenue and expenses are recorded when they are earned or incurred, respectively, regardless of when the cashflow happens.

1. In accrual: the payment would increase a Prepaid Insurance (asset) account $600 because the insurance service is owed to the business and not yet incurred. Each month, an adjusting Journal Entry would allocate that month's cost of $100 from the Prepaid Insurance account into an Insurance Expense account. The expense is thus recognized proportionately for each month of the policy.
   
2. In cash: the $600 payment would immediately increase Insurance Expense.
   

Cash Basis in the CustomBooks™ software

Users are not required to utilize the cash basis reporting method and may opt for accrual reporting only by selecting the accrual options in Accounting Settings or Setup Wizard.

When cash basis is enabled in a tenant, a separate set of records are kept for each transaction, which utilize the Upgraded Cash Basis mapping and framework. Maintaining records for both accrual and cash methods of accounting allows users to run either accrual basis or cash basis reports.

Cash Basis variant - CustomBooks™ presents two options for using Upgraded Cash Basis: a version that includes inventory on the balance sheet and a version that does not. These two options are referred to as the “Variant of Cash Basis reporting”. Cash accounting is generally not utilized by companies carrying inventory, but is offered at CustomBooks™ under two formats for users with inventory who wish to report cash basis numbers.

• Cash without Inventory: Business with inventory who report under the cash basis method generally opt to route all vendor purchases directly to Cost of Goods Sold, rather than report Inventory on the Balance Sheet. When cash is paid to vendors, Cost of Goods Sold increases for that period. Doing so presents a true representation of cash basis accounting, but does not sacrifice inventory reporting because inventory data can still be accessed by running an accrual-basis report. This variant is also applicable for service-based companies who do not carry inventory. 
  

• Cash with Inventory: Businesses with inventory who present Inventory on the Balance Sheet generally use the accrual reporting method. If you would like to report under cash basis and show inventory, the Cash with Inventory variant also presents Inventory on the Balance Sheet, but does not give as true of a representation of cash basis accounting. For instance, accrual adjustments are still made for Vendor Prepayments, Item Receipts, and Shipments, as these documents reflect timing differences between cash flow and inventory movement.

Mapping the Chart of Accounts

Because cash basis accounting follows the guidelines that revenue and expenses are recognized when cashflow occurs, certain accounts in the chart of accounts are not applicable for cash basis accounting, such as the Prepaid Insurance account referenced earlier.

To route transactions to the correct cash basis account, the Upgraded Cash Basis Mapping Tool allows the user to direct the software how to post to the cash basis ledger for the Payments, Deposits, and Journal Entry documents as well as the Expenses tab of Bill documents.

1. Prepaid Rent is mapped to Rent Expense
   
2. Prepaid Wages is mapped to Payroll Expense
   
3. Accounts Receivable is mapped to Sales*
   
4. Accounts Payable is mapped to Miscellaneous Expense*
   

Re-mapping the Chart of Accounts

If at any point, mapping needs to be changed or the variant updated, access the mapping tool under Accounting - Tools - Upgraded Cash Basis Mapping Tool. Mapping for individual General Ledger accounts can also be changed in the Account Card.

It is strongly recommended to run any reports needed for audit history before running the update, as re-mapping will override previous mapping for the selected periods. Such reports to save could include Balance Sheet Standard, Income Statement Standard, General Ledger, and Trial Balance.

If re-mapping is run for dates that are in a Closed Period, the related restrictions will need to be passed before the transactions are updated.

Accounts existing as of mid-2025: Converting to the Upgraded Cash Basis

Mapping deadline: The deadline for mapping is 6 months of the release, and this date is shown in Accounting Settings along with a link to complete the mapping. If mapping is not completed by the deadline, only the accrual method of reporting will be available once the deadline is passed. To re-enable the cash basis method, follow the prompts to complete mapping.

Accessing reports under the previous cash method: Historical data that was accounted for under the prior method of cash basis reporting can be accessed by selecting the ‘Cash (previous version)’ dropdown in the ‘Cash basis accounting method’ selection on the General pane of certain reports. The data for this report will be available up through the fiscal year end in which the mapping is completed.

For instance, if the fiscal year end is December 31 and mapping occurred July 1, 2025, the cash (previous version) records will be added to new documents until December 31, 2025. On January 1, 2026, new documents will only have the selected Upgraded Cash Basis record as well as accrual records.

Accessing reports under the Upgraded Cash method: Historical data will be appended with the Upgraded cash records once the mapping is completed and fully processed. The processing of historical data will allow for complete continuity of reports using the Upgraded Cash method, and will not disturb the previous cash records, as mentioned above. Please see Important Notes for the Release below for processing information.

Setting up a new tenant with cash basis mapping

In Setup Wizard, if the default chart of accounts is selected, mapping is populated automatically. The mapping can be revised at a later date using the Upgraded Cash Basis Mapping Tool or by changing the Cash Basis Equivalent on the Account Card. See mapping section above for further details. 

***Important Notes for Customers for this Release:

1. If it has been determined that your historical transactions can be processed under 5 minutes - you will be able to process the Upgraded Cash Basis Mapping Tool on your own.
   
2. Please note that during the processing time you will not be able to close the Mapping Tool window, or the application. If you do, then you will need to reinitiate Upgraded Cash Basis Mapping Tool. 
   
3. Please manually refresh your Test Company/Sandbox for these changes to apply. 

1. If it has been determined that your historical transactions need longer than 5 minutes to process, you will be contacted by the Support Team to schedule a date for it to process at night, or on a weekend.
   
2. The processing time estimate for your application will be told to you by the Support Team when they schedule your appointment.
   
3. Please make sure that you have gone through the Upgraded Cash Basis Mapping Tool, including choosing your Cash Basis variant and mapped accounts, BEFORE the appointment time.
   
4. The CustomBooks™ software can continue to be used after completing the Tool, prior to the appointment time. Any documents posted during this time will have Upgraded Cash Basis records, but keep in mind that historical documents will not be updated until the appointment is finished.
5. Once your appointment time has started, your application will not be accessible.
   
6. You will receive an email once all your historical transactions have been processed and your application is ready for use. 
   
7. Please manually refresh your Test Company/Sandbox for these changes to apply.