HowTo Video Tutorial Script (324 words)

-Tony: Hi, I’m Tony, and I’m here at Patriot Software to answer your question: Is a check considered cash, or accounts payable?

An outgoing check could be considered either cash or accounts payable depending on which type of accounting method you’re using. There are two main types of accounting methods for businesses: cash basis accounting, or accrual accounting.

The cash basis accounting method is considered the most simple accounting method for business transactions. If your business is using the cash basis accounting method, you report earnings when you actually receive them, and you report expenses when you actually pay them.

A check is more similar to cash if you’re using the cash basis accounting method. A check becomes and expense for the date you wrote it, not when the check actually clears the bank.

The same could be said for the reverse of this situation. If you receive a check from a customer, you record the check on the day you receive it, regardless of when you actually get around to cashing it.

The accrual method of accounting is different. You report income when you send an invoice to a customer, and not when you physically receive the payment. You record expenses when you incur them, not necessarily when you actually pay that expense. So, in accrual accounting, a check is treated more as an accounts payable item.

Let’s consider an example: George owns a lawn care company. George just finished mowing his customer’s lawn, and sends them an invoice. Under the cash basis accounting method, George won’t record any income until his customer sends him a check. Under the accrual method of accounting, however, even if he doesn’t receive a check from his customer until tomorrow, George will record income today, because he sent the invoice today.

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