QB Issue Resolution:
Answer 1:
This “a journal entry for the 200,000 crediting other income” is why. JE’s bypass accrual vs cash.
You can use a JE to create the receivable asset but not against income. Income happens as the note is depleted. I know you want the remaining balance to show as an asset on the balance sheet .
Back up and start over. “Sell” the settlement on an Invoice as other income for $200,000. Only the $100,000 actually received (as Receive Payment) will post as cash basis income this year.
To get the remaining 100k onto the balance sheet create a customer credit memo (same name as the payee) for 100k posted to an Other Asset account. Now going forward issue an Invoice as often as scheduled payments are posted as a reduction of the asset. What about income? I am getting to that. With a remaining balance of 100k on original invoice, and a new invoice for 10k for asset reduction, apply a portion of the 100k customer credit to that invoice and post received payment against the original invoice which will post as cash income when received.
Now those are the mechanics of it, I want you to review the process with your tax CPA to ensure that you can defer the income as payments are received. Just because you and I can agree that it should be so does not always mean the IRS will agree.
Answer 2:
“work not paid for it was work done several years ago and at this point those invoices were written off”
that would have constituted the exchange of one asset (A/R) for another but under cash accounting A/R is not a true asset and a write-off in the past would not have affected cash basis Balance Sheet.
So you have realized, just record the income as income as it comes in – but I still recommend using a Sales Receipt or Deposit and not a Journal Entry.
My final thought on Invoicing is, do you have to submit any paperwork to get this payment each year? Will you maybe in year 5 have to sue them all over again because they have stopped paying? That i n my view would call for invoicing to prove the debt.
Resolution for Issue 'I settled a lawsuit for an amount of money spread over 10 years with a large initial payment and the rest paid monthly. It will be considered income and I’m on cash accounting. I’m not going to use actual numbers but these are representative. The settlement amount is let’s say 200,000 and the initial payment is 100,000 received mid year. I want to show the 200,000 as an asset with the payment against that asset of 100,000 as cash income for this year. The remainder should be on the balance sheet as 100,000 asset. I have added an account on the chart of accounts for the settlement asset account as an “other asset” which I thought would act like Accounts Receivable. I did a journal entry for the 200,000 crediting other income and debiting settlement. I then did a journal entry for the initial payment (100,000) crediting settlement and debiting the checking account. That is what I expected to show up on the profit and loss when cash accounting was selected but instead the entire 200,000 shows up. how do I get it to work in cash accounting?' available: Yes (Solved).
Source: Intuit Community forum.
I settled a lawsuit for an amount of money spread over 10 years with a large initial payment and the rest paid monthly. It will be considered income and I’m on cash accounting. I’m not going to use actual numbers but these are representative. The settlement amount is let’s say 200,000 and the initial payment is 100,000 received mid year. I want to show the 200,000 as an asset with the payment against that asset of 100,000 as cash income for this year. The remainder should be on the balance sheet as 100,000 asset. I have added an account on the chart of accounts for the settlement asset account as an “other asset” which I thought would act like Accounts Receivable. I did a journal entry for the 200,000 crediting other income and debiting settlement. I then did a journal entry for the initial payment (100,000) crediting settlement and debiting the checking account. That is what I expected to show up on the profit and loss when cash accounting was selected but instead the entire 200,000 shows up. how do I get it to work in cash accounting?: this issue or error code is a known issue in Quickbooks Online (QBO) and/or Quickbooks. Support for this issue is available either by self-service or paid support options. Experts are available to resolve your Quickbooks issue to ensure minimal downtime and continue running your business. First try to resolve the issue yourself by looking for a resolution described below. If it is a complex issue or you are unable to solve the issue, you may contact us by clicking here or by using other support options.
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