Multi-book Accounting Overview

Overview

With Accrual Basis Accounting, income is generally recorded in the period that it is earned, and expenses are recorded in the period that they are incurred, regardless of when payment is received or paid out. This method is typically used by larger businesses or when businesses require audited Financial Statements. On the other hand, Cash Basis Accounting is used to post transactions to the General Ledger only when cash is received or paid out. Using this method, revenue is only recorded when a payment is received, and expenses are only recorded when making a payment. This method is typically used by smaller businesses and/or businesses in the service industry to help the business keep a close eye on money coming in and going out.

Accounting Seed provides the ability to have an Accrual Ledger and a Cash Ledger simultaneously, using Multi-book Accounting. When using the “Accrual and Cash” Accounting Method, source documents will be created and posted only to the Accrual and Cash Ledger, which serves as the primary Accrual Ledger. When cash is received or paid out, transactions will be posted to both the Accrual and Cash Ledgers.

When creating a Ledger and selecting the “Accrual and Cash” Accounting Method (Multi-book Accounting), the system will automatically create a Related Cash Ledger.

Note: Click here to view the above image in full screen.

Some of the benefits when using Multi-book Accounting include the following:

• Easy to keep close focus on cash in and out.
• If taxes are filed on a Cash Basis, it is very easy to turn information over to a tax accountant.
• Financial reports can easily be run on an Accrual or Cash Basis.

View the video below to learn more about Accrual and Cash Basis Accounting.

Important: AvaTax can be configured to calculate sales tax, however only on Accrual Ledgers, as AvaTax does not support the calculation of tax with Cash Basis Accounting. If you configure a Ledger where the Accounting Method is “Cash,” then the related Tax Settings record must be configured with an AS Native Tax method. If the Accounting Method that is selected on the Ledger is “Accrual and Cash,” then you can configure AvaTax on the related Tax Settings record for the Accrual and Cash Ledger since this is equivalent to your Accrual Ledger. And then, configure AS Native Tax on the Tax Settings record for the Related Cash Ledger, although this will not have any impact on what is recorded. In this scenario, the tax calculated on the Accrual and Cash Ledger will be recorded on the Cash Ledger when the payment is received.

Important: When using the ERP package to track inventory, the ability use a Cash Ledger is currently not supported. 

Contents

• Migrate to Multi-book Accounting
  • No Posted Transactions
  • Posted Transactions
• Configure Settings for Multi-book Accounting
  • Accounting Method
  • Default GL Accounts
  • Accrual and/or Cash field on the Journal Entry and Amortization Entry objects
  • Add the Ledger field to the Transactions related list
• Large Data Volume when using Multi-book Accounting
• Consolidation Ledgers with Multi-book Accounting
• Create and Post Records with Multi-book Accounting
  • Billings or Payables
  • Cash Receipts or Cash Disbursements - Posted
  • Cash Receipts or Cash Disbursements - Applied
  • Post and Apply Order
• Financial Reports and Salesforce Reports

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Migrate to Multi-book Accounting

No Posted Transactions

If no transactions have been posted against the Ledger, and you want to switch to Accrual and Cash as the Accounting Method (Multi-book Accounting), an additional Ledger is required. For more information, please send an email to licensing@accountingseed.com.

Once the additional Ledger has been provisioned, on the existing Ledger that has no posted transactions, you can simply select Accrual and Cash as the Accounting Method on the Ledger. The Accrual Ledger will function as your primary Ledger. The system will automatically create the Related Cash Ledger, as mentioned above. From this point, the system will post transactions on both Ledgers, at the appropriate time. 

Posted Transactions

If transactions have been posted against the Ledger, and you want to switch to Accrual and Cash as the Accounting Method (Multi-book Accounting), an additional Ledger is required. For more information, please send an email to licensing@accountingseed.com.

Once the additional Ledger has been provisioned, on the existing Ledger that has posted transactions, you can simply select Accrual and Cash as the Accounting Method on the Ledger. The Accrual Ledger will become your primary Ledger. The system will automatically create the Related Cash Ledger, as mentioned above. From this point, the system will post transactions on both Ledgers, at the appropriate time.

If you want to switch from Accrual to Accrual and Cash (with posted transactions), keep the following points in mind:

• Records will continue to be created and posted on the Accrual Ledger just as they are today.
• You will need to create opening balances on the Cash Ledger.
• If you unapply a Cash Receipt to a Billing or Cash Disbursement to a Payable, or unpost a source document prior to making the switch to a different Accounting Method, you will need to manually adjust the opening balances that were previously entered.
• With the NPSP Connection, source documents will only be created on the (primary) Accrual Ledger. They will NOT also be automatically created on the Related Cash Ledger. Additionally, source documents cannot be manually created on the Related Cash Ledger.  

Configure Settings for Multi-book Accounting

Accounting Method

The Accounting Method drop-down list on the Ledger record provides the option to select from one of the following three methods:

• Accrual
• Cash
• Accrual and Cash

The Accounting Method field will automatically be available on the Ledger page layout for new Accounting Seed customers. However, existing customers will need to add this field, which was included with our Spring ’24 Release. If you have not added the Accounting Method field to the Ledger object, use the information in the Add the Accounting Method field to the Ledger section of the Spring ’24 Configuration Changes article to add this field. 

Important: After adding this field, until you are actually ready to switch to Accrual and Cash on the Transactional Ledger record, Accrual should initially be selected from the Accounting Method drop-down list. If you need assistance, use the Configure a Ledger article to update the Accounting Method field on the Ledger.

Default GL Account Settings

The Default GL Accounting Settings screen includes the Cash Basis Accounting section with the following two GL Account fields:

• Unapplied Revenue GL Account – Cash Receipts will initially post to this GL Account. Once applied to a Billing, this will be reversed and posted to the Revenue and Tax GL Account(s) on the Billing.
  
  
• Unapplied Expense GL Account – Cash Disbursements will initially post to this GL Account. Once applied to a Payable, this will be reversed and posted to the Expense GL Account(s) on the Payable.

Note: When using the ”out of the box” Unapplied Revenue GL Account, you may need to manually select the appropriate Sub Type 1 on this GL Account, and select Sub Type 2, if necessary.

If you need assistance with creating these GL Accounts, refer to the Create a New GL Account article. Once the GL Accounts have been created, use the information in the Default GL Accounting Settings article to select the GL Accounts in the Cash Basis Accounting section.

Accrual and/or Cash field on the Journal Entry and Amortization Entry objects

The Accrual and/or Cash field has been added to the Journal Entry and Amortization Entry objects. This field allows you to indicate on which Ledger(s) you wish to post transactions to the General Ledger. For example, you might need to create a Journal Entry to post only on the Cash Ledger or you might need to create a Journal Entry to post on both the Accrual and Cash Ledgers.

Note: Once a Journal Entry and/or Amortization Entry has been posted, the Accrual and/or Cash field cannot be edited. An error message will display if you attempt to change this field after posting.

The selections in the Accrual and/or Cash drop-down list include the following:

• Accrual
• Cash
• Accrual and Cash

This field will automatically be available for new Accounting Seed customers. Existing Accounting Seed customers will need to add it to the page layout on both objects. Use the steps below to add this field.

1. Click the Gear icon and select Setup.
2. Click Object Manager.
3. Enter Journal Entry in the Quick Find textbox. Then, select the Journal Entry object.
4. Click Page Layouts and select the Journal Entry Layout.
5. From Fields, drag and drop the Accrual and/or Cash field onto the page layout directly below the Type field.
6. Click Save.
7. Click Object Manager.
8. Enter Amortization Entry in the Quick Find textbox. Then, select the Amortization Entry object.
9. Click Page Layouts and select the Scheduled Revenue Layout.
10. From Fields, drag and drop the Accrual and/or Cash field onto the page layout directly below the Ledger field.
11. Click Save.

Add the Ledger field to the Transactions Related List

When using Multi-book Accounting, we recommend adding the Ledger name as a column on the Transactions related List. This will help you to clearly identify transactions generated by Ledger (Accrual or Cash). The steps below provide information to add the Ledger field to the Transactions related list on the Billing object.

1. Click the Gear icon and select Setup.
2. Click Object Manager.
3. Enter Billing in the Quick Find textbox. Then, select the Billing object.
4. Click Page Layouts and select the Billing Layout.
5. Click Related Lists.
6. Click the Wrench icon on the Transactions related list to display the Related List Properties – Transactions dialog box.
7. From the Available Fields column, select Ledger. Then, click the right arrow to move it into the Selected Fields column.
8. Use the up and down arrows to move the Ledger column into the location that you want it to display when you review transactions on a Billing.
9. Click OK.
10. Click Save.

Best Practice: We also recommend adding the Ledger name column to the Transactions related list for Cash Receipts, Billing Cash Receipts, Payables, and AP Disbursements.

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Large Data Optimizer when using Multi-book Accounting

If you want to track both Accrual and Cash, and you have a high volume of transactions, our best practice recommendation is to enable the Large Data Optimizer (LDO) feature. LDO was included with the Spring ’24 release, and it provides the ability to post/unpost more lines on these source documents: Billings, Payables, and Journal Entries.

If you want to have the Large Data Optimizer (LDO) feature enabled, submit a case to our Customer Support team. Once the LDO feature has been enabled, when you post/unpost any of the above source documents from the detail page or the list view, the records will be posted/unposted asynchronously as a system background process.

Consolidation Ledgers with Multi-book Accounting

You can create Consolidation Ledger Hierarchies for Accrual Ledgers and separate Ledger Hierarchies for Cash Ledgers. However, an Accrual Ledger cannot be consolidated with a Cash Ledger. If the parent on the Ledger Hierarchy is Accrual, then all of the children must be Accrual. And, if the parent on the Ledger Hierarchy is Cash, then all of the children must be Cash. For more information about the Ledger Hierarchy when using Consolidation Ledgers, refer to the Set up Consolidations article.

Best Practice: If you change the Accounting Method on a Consolidation Ledger, we recommend that you create a new Ledger Hierarchy. For more information, refer to the Set up Consolidations article.

Important: When you create a Ledger with the Type selected as Consolidations-Transactional, the Accounting Method must be either Accrual or Cash. It cannot be Accrual and Cash (Multi-book Accounting). An error message will display if you attempt to select Accrual and Cash on a Consolidations-Transactional Ledger or Consolidations-Budget Ledger. Additionally, the Accounting Method on the Eliminations Ledger must be the same as the Accounting Method on the related Consolidations-Transactional Ledger. 

Create and Post Records with Multi-book Accounting

Billings or Payables

When the Accounting Method on the selected Ledger is Accrual and Cash (Multi-book Accounting), Billings and Payables will be created only on the primary “Accrual and Cash” Ledger. When the records are posted, transactions will only be generated on this primary Ledger. No transactions will be generated on the Cash Ledger because money has not been received or paid.

The sample Billing below has been posted. Transactions were only generated on the Accrual Ledger. No transactions were generated on the Cash Ledger.

Note: The Cash Ledger will clearly be identified by the word “Cash” in parentheses as a part of the Ledger name.

Note: Click here to view the above image in full screen. 

Cash Receipt or Cash Disbursement - Posted

When the Accounting Method for the Ledger is Accrual and Cash (Multi-book Accounting), Cash Receipts and Cash Disbursements will be created on the primary “Accrual and Cash” Ledger. When they are posted, transactions will be created on both the primary Accrual and Cash Ledger and the Related Cash Ledger. The sample Cash Receipt below has been posted. Notice that transactions were generated on both Ledgers for this posted Cash Receipt. The credit transaction on the Cash Ledger will go into the GL Account that was selected in the Unapplied Revenue GL Account field on the Default GL Account Settings screen.

Note: Click here to view the above image in full screen. 

Note: If a payment is made using a credit card, it will be treated as a cash payment as long as the GL Account has the Bank/Credit Card Account checkbox selected.

When a Cash Disbursement is posted, the debit transaction on the Cash Ledger will go into the GL Account that was selected in the Unapplied Expense GL Account field on the Default GL Account Settings screen.

Note: Click here to view the above image in full screen. 

Cash Receipt or Cash Disbursement - Applied

When the Accounting Method on the Ledger is Accrual and Cash (Multi-book Accounting), the BCR (Billing Cash Receipt) or the APD (Accounts Payable Disbursement) will be created on the primary “Accrual and Cash” Ledger when the Cash Receipt is applied to the Billing, or the Cash Disbursement is applied to the Payable.

On the primary “Accrual and Cash” Ledger, the system will reverse the transactions as normal. On the Cash Ledger, when generating transactions on the BCR or APD, the system will reverse the amount that was recorded in the Unapplied Revenue GL Account or Unapplied Expense GL Account, and it will look up the related Billing or Payable to determine how to record the actual Revenue or Expense amounts.

The sample BCR (Billing Cash Receipt) screen below shows the Accrual Ledger transactions and the Cash Ledger transactions. You can see the debit transaction on the Cash Ledger (to reverse the previous credit transaction) to the Unapplied Revenue GL Account and the credit transactions based upon the related Billing Line(s) items.

Note: Click here to view the above image in full screen. 

When the Cash Receipt is applied to the Billing, the Transactions related list on the Billing will include transactions for the primary Accrual and Cash Ledger, as well as transactions for the Cash Ledger, which are actually the same transactions that were recorded on the Billing Cash Receipt (BCR).

Note: Click here to view the above image in full screen. 

If you do not want to see the BCR transactions from the Cash Ledger on the Billing, you can add a filter to remove these transactions using the steps below.

1. Click the Gear icon.
2. Select Edit Page.
3. Scroll down to the Transaction related list and select it.
4. In the right panel, if Upgrade Now displays to upgrade to Dynamic Related List, click that button. Then, continue with step 5.
5. Under Related List Filters, click Add Filter.  
6. From the Field drop-down list, select the Billing Cash Receipt field and Equals as the Operator. Leave the Value blank.
7. Click Done.
8. Click Save.

The sample APD (Accounts Payable Disbursement) screen below shows the primary “Accrual Cash” Ledger transactions and the Cash Ledger transactions. On the primary “Accrual and Cash” Ledger, the normal transactions display and on the Cash Ledger, you can see the debit transaction based upon the related Payable Line(s) item and the credit transaction (to reverse the previous debit transaction) to the Unapplied Expense GL Account.

Note: Click here to view the above image in full screen. 

Note: As on the Billing, when the Cash Disbursement has been applied to the Payable, the Payable will include transactions for the primary Accrual and Cash Ledger, as well as transactions for the Cash Ledger, which are actually the same transactions that were recorded on the Accounts Payable Disbursement (APD). If you do not want to see the APD records on the Payable Transactions related list, display a Payable, and follow the steps above to add a similar filter on the AP Disbursement field.

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Post and Apply Order (on Cash Ledgers)

Since each step in the process works off of what has already been recorded, it is important to record and apply in the order of the Accounting Period Date or the Applied Date (from the earliest date to the latest date). For example, you might have a partial paid Cash Receipt in the Accounting Period of 2024-01, a Credit Memo that was applied to it in 2024-02, and a final partial Cash Receipt in 2024-03.

Using the above example, you might determine that you need to reverse the initial partial Cash Receipt from 2024-01. Since the order to record and apply must be in the order of Accounting Period Date or the Applied Date, you would need to first, reverse the final partial Cash Receipt from 2024-03, and then reverse the Credit Memo that was applied in 2024-02, and after that reverse the partial paid Cash Receipt from 2024-01. Once the Cash Receipt in 2024-01 is reversed, you can go ahead and re-apply the Credit Memo in 2024-02 and the partial Cash Receipt in 2024-03, in that order.

When applying both a Credit Memo and a payment(s) in the same Accounting Period, the Credit Memo must be applied first.

Note: When you attempt to unapply records out of sequential order, an error message.

When you void a Cash Receipt on a Billing that a Cash Receipt has been applied to, the Void Date must be in an Accounting Period that is greater than or equal to the Accounting Period on the related Billing Cash Receipt (BCR) or the Billing Credit Memo (BCM).

For more information about partial payments on a Cash Ledger, refer to the Cash Basis Processes article.

Best Practice: We recommend that the Billing Cash Receipts and the AP Disbursements source records be set to Auto-Post in the Post Settings screen

Financial Reports and Salesforce Reports

Accounting Seed Financial Reports, as well as reports that are created using the Salesforce Report Builder can be selected by Ledger. Therefore, when running reports, you can simply select the Cash Ledger to view a Cash Basis report or the Accrual Ledger to view an Accrual Basis report.

Note: Click here to view the above image in full screen.

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Winter '25 Preview 1 Release

Release Notes and Schedule

• With the NPSP Connection, source documents will only be created on the (primary) Accrual Ledger. They will NOT also be automatically created on the Related Cash Ledger.
• Accrual and/or Cash field cannot be edited on posted Journal Entry and/or Amortization Entry records. 

• When applying both a Credit Memo and a payment(s) in the same Accounting Period, the Credit Memo must be applied first.

• When you void a Cash Receipt on a Billing that a Cash Receipt has been applied to, the Void Date must be in an Accounting Period that is greater than or equal to the period on the related BCR or BCM.

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Summer '24  Release

Release Notes and Schedule

This article was new with the Summer 24 release.