What changed in this revised FAQ
ADI/ADE formulas added
Added practical formulas that explain prior-period payments, unpaid current-period activity, linked-account movement, and non-income/non-expense portions.
Sales tax ADE example
Explains why ADE can appear even when there are no Bills or Purchase Journals.
“Not adjusted” clarification
Clarifies that some transaction types are not adjusted directly, but can still affect ADI/ADE if they change linked-account balances.
Historical/conversion section
Adds examples for old invoices, old payables, and opening balances paid or cleared in a later period.
Overview
AccountEdge is an accrual-based program, but certain reports can be displayed on a cash basis. The purpose of Cash Basis reports is to produce cash-based financial reports for the Balance Sheet and the Profit & Loss.
Cash Basis reports often create two report-only accumulator lines:
| Accumulator | Full name | Purpose |
|---|---|---|
| ADI | Adjustment for Deferred Income | Used to adjust accrual income and linked asset-account timing into cash-basis income. |
| ADE | Adjustment for Deferred Expenses | Used to adjust accrual expenses and linked liability/equity-account timing into cash-basis expenses. |
How cash basis is accomplished in an accrual-based program
- AccountEdge backs out balances from Balance Sheet accounts that are linked accrued assets, linked accrued liabilities, and certain linked equity accounts.
- The backed-out amounts are moved into the Profit & Loss through report-only accumulators.
- AccountEdge determines whether income and expenses on the Profit & Loss were paid or unpaid during the report period.
- If income or expenses were paid, they are kept on the cash-basis report.
- If income or expenses were not paid, they are backed out of the cash-basis report.
What happens on the Balance Sheet
- Linked accrual accounts such as Accounts Receivable and Accounts Payable are zeroed out for cash-basis presentation.
- Amounts zeroed out from the current year are adjusted into Current Year Earnings.
- Amounts zeroed out from previous years are adjusted into Retained Earnings.
- The Current Year Earnings account on the Balance Sheet should equal the Net Income or Loss on a basic Profit & Loss if both reports are run for the same period.
General Balance Sheet rules
- Under accrual basis, the Balance Sheet includes accrued asset, accrued liability, and equity balances as of the report date.
- Under cash basis, AccountEdge zeroes out accrued assets, accrued liabilities, and equity accounts that are also configured as linked accounts.
- Linked asset accounts used to track receivables are treated as income-related timing on the cash-basis Profit & Loss.
- Linked liability accounts used to track payables are treated as expense-related timing on the cash-basis Profit & Loss.
- Amounts backed out from the Balance Sheet are adjusted to Current Year Earnings and/or Retained Earnings depending on whether the activity belongs to the current period or a prior period.
What happens on the Profit & Loss
- AccountEdge creates accumulators for Adjustment for Deferred Income and Adjustment for Deferred Expenses.
- These accumulators are report-only lines, not actual General Ledger accounts.
- The adjusted Current Year Earnings figure from the Balance Sheet is used to adjust deferred income for backed-out accrued assets and deferred expenses for backed-out accrued liabilities and equities.
- The accumulators are then reduced or increased by reviewing open sales, purchases, payments, discounts, credits, debits, deposits, payroll, and linked-account movement.
- Each accumulator is displayed only if it has a non-zero amount.
New Practical ADI and ADE formulas
The original article explains the concept of deferred income and deferred expenses. This revised version adds working formulas support can use when explaining or troubleshooting the numbers.
ADI formula
In plain English: ADI explains the difference between income recorded because an invoice exists and income that should appear because customer cash was actually received.
ADE formula
In plain English: ADE explains the difference between expenses recorded because a bill or liability exists and expenses that should appear because cash was actually paid or a linked liability was cleared.
| Line | Positive amount usually means | Negative amount usually means |
|---|---|---|
| ADI | Cash income is being added, often from prior-period or historical A/R collected during the report period. | Cash income is being reduced, often from current-period invoices that were not collected by report end. |
| ADE | Cash expenses are being added, often from prior-period bills, payroll, tax, or other liabilities paid or cleared during the report period. | Cash expenses are being reduced, often from current-period bills, liabilities, tax, or payroll that were not paid or cleared by report end. |
Transactions adjusted on the Cash Basis Profit & Loss
When the user runs a cash-basis Profit & Loss, AccountEdge first backs out the Balance Sheet linked accrual accounts for the time frame specified in the report customization window. Then it reviews transaction types that affect the cash-basis Profit & Loss.
| Transaction types adjusted on the P&L | Transaction types not adjusted directly on the P&L |
|---|---|
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Updated Clarification for linked accounts and “not adjusted” transactions
This is the key clarification that should be added to avoid confusing reps and users:
For example, a General Journal entry, Spend Money transaction, or Receive Money transaction may not be adjusted directly as its own transaction type. However, if it changes Sales Tax Payable, Accounts Payable, Accounts Receivable, payroll liabilities, customer deposits, supplier deposits, or another linked account used in the cash-basis back-out process, it can influence the deferred income or deferred expense amount.
The software does not determine whether the linked account is conceptually the correct account for the business. It follows the linked accounts selected in the company file.
New Sales tax example: why ADE can appear with no Bills
A real-world troubleshooting case showed that ADE can appear even when there are no Bills or Purchase Journals. This can happen because a Sales Invoice can credit Sales Tax Payable. Sales Tax Payable is a linked liability account, so timing differences in that account can flow into ADE on a Cash Basis Profit & Loss.
Suggested troubleshooting check
When the user says, “There are no bills, so why do we have deferred expenses?” support should check Sales Tax Payable, payroll liabilities, and other linked liability accounts before assuming the report is wrong.
New Historical, conversion, and opening-balance examples
Historical sales and purchases themselves may not create cash impact inside the report period, but their payments do. That point should be expanded because it is especially important after a conversion from another accounting system or when a company file has opening A/R, opening A/P, tax, or payroll balances.
| Scenario | Cash-basis effect | Accumulator usually involved |
|---|---|---|
| A 2025 customer invoice is paid in 2026. | The cash was received in 2026, even though the invoice was from a prior period. The income portion may appear through deferred income timing. | ADI |
| An old payable or converted Accounts Payable balance is paid in 2026. | The cash was paid in 2026, even though the bill/liability came from a prior period. The expense or liability timing may appear through deferred expense timing. | ADE |
| A converted payroll, tax, or sales tax liability is cleared in the current period. | The liability clearing can affect the cash-basis report if the account is a linked liability account. | ADE |
Linked accounts used by Cash Basis reports
AccountEdge begins the process of producing cash-basis reports by looking at linked accounts. If an account is set up as a linked liability account, it can be zeroed out and moved to deferred expenses. If an account is set up as a linked asset account, it can be zeroed out and moved to deferred income.
| Usually feeds ADI | Usually feeds ADE |
|---|---|
| Accounts Receivable / Trade Debtors | Accounts Payable / Trade Creditors |
| Customer deposits and customer-side clearing accounts | Sales Tax Payable and other tax liability accounts |
| Linked accrued asset accounts | Payroll liabilities and payroll deduction payable accounts |
| Vendor deposits paid may affect cash-basis expense treatment depending on setup | Supplier deposits and linked accrued liability/equity accounts |
New Reports needed for ADI/ADE troubleshooting
| Report | Basis | Why it helps |
|---|---|---|
| Profit & Loss by month | Cash and Accrual | Identifies the month creating the largest ADI or ADE movement. |
| Balance Sheet | Accrual | Shows ending balances in linked control accounts before cash-basis conversion. |
| Trial Balance | Accrual | Helps identify linked account movement and ending balances. |
| Account Transactions / General Ledger Detail | Accrual detail | Shows debits and credits by linked account and source journal. |
| Customer Ledger / Invoice Transactions | N/A | Shows customer payments and the invoices they were applied to. |
| Supplier Ledger / Purchase Transactions | N/A | Shows supplier payments and the bills they were applied to. |
| Tax Detail Cash and Tax Detail Accrual | Both, if available | Helps explain sales-tax timing inside ADE. |
| Linked Accounts and Tax Code List | Setup review | Confirms which accounts AccountEdge is using for receivables, payables, tax, payroll, and deposits. |
Suggested support workflow
- Run the Profit & Loss on both Cash and Accrual basis for the same date range.
- Break the Cash P&L out by month and find the month with the largest ADI or ADE amount.
- For ADI, review Accounts Receivable, customer payments, historical/opening A/R invoices, customer deposits, and linked accrued asset accounts.
- For ADE, review Accounts Payable, Sales Tax Payable, payroll liabilities, supplier deposits, converted/opening liabilities, and linked accrued liability/equity accounts.
- Do not stop at Bills when troubleshooting ADE. Sales tax, payroll, deposits, and linked liability movement can also create ADE.
- Compare Tax Detail Cash to Sales Tax Payable activity if sales tax appears to be part of the issue.
- Escalate if the linked accounts are correct but the amount cannot be reconciled after reviewing P&L by month, linked account transactions, tax detail, and payment application reports.
Draft note: This file is a reconstructed internal draft based on the current AccountEdge Cash Basis Reporting article and the ADI/ADE troubleshooting findings from the recent customer case. Highlighted New/Updated callouts identify the proposed additions or revised explanations.