cash accounting/accrual accounting

lgarside Registered Posts: 122 πŸŽ† 🐘 πŸŽ†
I do accounts for a hairdresser and then an accountant signs them off.
I use the cash accounting method as it's a tiny business and the accountant is happy with this but he always makes an accrual for his fees? As I use the cash accounting method I would expect to see his fees in the P&L as and when they are incured. He doesn't accrue/prepay insurance payments etc so just wondering if it's standard practice to part accrue expenses?


  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 πŸŽ† 🐘 πŸŽ†

    Me, either I would use accruals accounting, or accruals accounting. Only very rarely would I use cash accounting as it's strictly not correct, but to each their own.

    It's habit to do the accountancy journal and indeed if he missed it out, they would under-declare expenses and pay more tax. So I can see why he included it. I'm surprised he doesn't bring in creditors though. If he switched to accruals now, feasibly they'd save some tax as the accounts caught up - assuming there were some creditors and accruals that is.
  • mini_schnauzer
    mini_schnauzer Registered Posts: 347
    It is standard practice at the Chartered Accountants where I work to accrue the fees in, as even though not invoiced yet, the fees refer to that accounting period; so an accrual is always entered.
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