Accounting methods refer to the amounts included as assessable income in any income year and depend on whether the business accounts for income on a cash basis or accruals basis. The ATO is advising businesses not to confuse these two accounting methods with the two types of GST accounting methods (cash and non-cash) and said businesses need to account for all transactions within an income year using the same method.
For businesses to be accessible on a cash basis it must include payments received during the income year, even if the work was done in a different income year. It doesn’t include amounts where the work was done, but the business did not receive payment during the income year.
When business completes their tax return, they may have to reconcile any unpresented cheques to remove them from income or deductions if the business had previously included these amounts.
If a business accounts for assessable income on an accruals basis, they must include all income earned for work done during the income year. This is even if the business hadn’t received payment by the end of the income year.
