For cash basis accounting can I account for the cost when I write a check, or does it need to be accounted for when the check clears the bank?

[bill-s]

I have deductions I would like to take for 2013 but the check didn't clear until early 2014

[RobertW]

bill.s

Hello - for a cash basis tax payer, you deduct the expense when you no longer have control of the check.   Mailing the check means it is out of your control.  You do not have to wait for the check to clear you bank account.

Hope this answers your question.  If you have any more questions please let us know.

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[Samsun683]

Hi 

cash basis company . Payroll check written to employee and mailed on 12/27/21. Check was not deposited until 1/6/22. What is the 2021 journal entry to record this expense? I thought no accounts payable allowed when cash basis 

[ThomasM125]

Since you mailed the checks before the end of the year, you would debit the payroll expense and credit cash. The checks not cashed in 2021 will be listed as outstanding on your bank reconciliation, and the expense will be allowed in 2021.

[Samsun683]

Thank you! 

For checks I received as business payments that didn’t clear yet, are those money in transit accounts with a reversal entry in January? Or do I just call it income and cash? I use waveapps for my bookkeeping and it wants me to do money in transit in order for the internal reconciliation from my imported bank statements to reconcile 

[DaveF1006]

Yes, for income tax purposes, these are consider income and cash. Were these checks paid in posted in December but didn't clear until January?

[Samsun683]

checks I received on 12/30 and deposited 1/3. I had constructive receipt of them hence why I feel comfortable including them in 21 income. I’m still unsure if I should delineate those separate  from cash in book keeping and the tax return or just call it all cash 

[AliciaP1]

In your bookkeeping, you should input the deposits as 12/30 and then hold the difference between book & bank as a reconciling item.

This still qualifies as cash-based accounting for tax purposes and you can then include the income on your 2021 taxes.  Just be sure you do not double count the income and use the deposited date in 2022.