I am a new Treasurer for a 501c3 non-profit PTA in Washington State.
My understanding is that for cash basis accounting, when you no longer have control of a payment, i.e., a physical check, that is when an entry is made to debit expense and credit cash in your accounting system. When I think of loss of control, it would be either mailing the check or handing a check to an individual. Is my thinking accurate here?
However, what happens if I write a bunch of checks toward the end of the calendar month and they do not get mailed out (or control is not lost) until the next month? The checks have been written, however, they are still in my control. In that scenario, it seems as though these checks would not be considered outstanding at month-end, and I would not record the expense until the next month.
I want to make sure my understanding is clear on both of these points, as I currently have many checks I wrote at the end of September (check date = September) that I did not hand out to people, or mail to the vendor, until the month of October. For these checks, I am not planning on entering the expenses into my accounting records until October.
In contrast, I also have many checks I wrote at the end of September (check date = September) that were mailed / handed to individuals, but did not clear the bank until October. For these, I plan on entering the expenses into my accounting records for September and showing them as outstanding checks on my September reconciliation.
I want to make sure I'm accounting for these transactions properly on my monthly financials.
Thanks so much for helping!
