Does MONA do cash or accrual accounting?

Quick answer: both. MONA’s books always record on accrual, and every report has an Accrual or Cash switch. Cash basis is a view computed from the same entries, so switching never changes your books. Pick the default your reports open on in Finance, then Books, then Chart of accounts, under Report basis.

What is the difference?

• Accrual counts income when you send an invoice and costs when a vendor bills you. A sofa billed in March and paid in April is a March cost.
• Cash counts income when a client pays and costs when you pay a vendor. The same sofa is an April cost.

Most bookkeepers keep a design studio on accrual so each project’s income and cost land in the same month. Many small studios file taxes on cash. MONA gives you both from one set of books.

How do I switch a report?

1. Click Finance in the sidebar.
2. On the Overview tab, or in Books on the Overview or Close pack tab, click Accrual or Cash next to the report.
3. The figures reload. The label beside the switch, Accrual basis or Cash basis, always names the basis of the numbers on screen.
4. In Close pack, Download CPA package (.zip) exports the basis you are viewing. The file name ends in accrual-basis or cash-basis.

Switching a report is just for your screen. Your teammates keep seeing the studio default.

How do I set the studio default?

1. Go to Finance, then Books, then Chart of accounts.
2. Under Report basis, click Accrual or Cash.

Every report opens on that basis for everyone from then on. You can also click Make cash basis the studio default (or accrual) next to any report switch. The Accountant seat sees the default but cannot change it.

How does MONA work out cash basis?

MONA does not keep a second ledger. When you open a report on cash basis, it reads the same journal entries and:

1. Skips the accrual entries. Sending an invoice and approving a vendor bill are left out.
2. Counts payments instead. A client payment is counted as income on the payment date, split across the invoice’s revenue lines and sales tax in the same proportions as the invoice. A payment on a vendor bill is counted as cost on the payment date, split across the bill’s lines. A partial payment counts partially.
3. Leaves everything else alone. Card and bank expenses you categorize in the Bank inbox are already cash. Card fees, manual journal entries and reconciliation adjustments pass through unchanged.

On a cash basis balance sheet, accounts receivable and accounts payable are zero, and the difference shows in current year net income, so assets still equal liabilities plus equity.

What stays the same on both bases?

• Deposits. A client deposit stays a liability until you apply it to an invoice. A deposit you paid a vendor stays in Vendor Deposits, an asset, until a final bill uses it up. See How do I enter vendor bills and track what my studio owes in MONA?.
• Sales tax. The sales tax collected report stays on the invoice date, because tax is owed when the sale is invoiced. The close pack notes this under the report.
• Balances you owe or are owed. Cash on hand, the accounts receivable and accounts payable balances and aging, and retainer balances are the same on either basis.

Can I ask the agent?

Yes. Ask "what was our net income last month on cash basis" or "send me the September close pack on accrual basis". An owner or admin can also say "make cash basis our default".

Want a hand?

If your bookkeeper wants to check how MONA handles their basis before you switch, book 30 minutes with the founder at calendly.com/mona-justin/30min and bring them along.

Frequently asked questions

What is the difference between cash and accrual accounting?

Accrual counts income when you invoice and costs when a vendor bills you. Cash counts income when a client pays you and costs when you pay a vendor. The same invoice or bill can land in different months depending on which you use.

Does switching to cash basis change my books?

No. MONA’s ledger always records on accrual: an invoice posts when you send it, a vendor bill posts when you approve it. Cash basis is computed from those same entries when you open a report. Switching back and forth never rewrites, reposts or deletes anything.

How does MONA work out cash basis?

It skips the entries that record an invoice being sent or a bill being approved. When a client pays an invoice, the payment is counted as income on the payment date, split across the invoice’s revenue lines and sales tax in the same proportions as the invoice. When you pay a vendor bill, the payment is counted as cost on the payment date, split across the bill’s lines. Partial payments count partially. Card and bank expenses you categorize are already cash and pass through unchanged.

What happens to accounts receivable and accounts payable on cash basis?

They are zero on the cash basis balance sheet, because nothing is owed to you or by you until the cash moves. The difference shows up in current year net income, so the balance sheet still balances.

Are client deposits and vendor deposits income or cost on cash basis?

No, on either basis. A client deposit stays a liability until you apply it to an invoice, and a deposit you paid a vendor stays in Vendor Deposits, an asset, until a final bill uses it up.

Why does the sales tax report not change with the basis?

Sales tax is owed to the state when the sale is invoiced, which is what a quarterly return reports. So the sales tax collected report stays on the invoice date on both bases, and the close pack says so under the report.

Which numbers move when I switch?

The profit and loss, balance sheet, trial balance, general ledger detail, project profitability, the Finance Overview profit and loss and expenses cards, and the month to date figures on the Books Overview. Cash on hand, the accounts receivable and accounts payable balances and aging, retainer balances and sales tax are the same on either basis.

Which basis should my studio use?

Ask your accountant, because it usually follows how you file taxes. Studios that hold client deposits for months and pay vendors ahead of delivery often keep accrual books so each project’s income and cost land in the same period. You can view the other basis any time.

Can my accountant switch the basis?

Yes. The Accountant seat can view every report on either basis and download the CPA package on either basis. Only the owner, an admin or a member with finance access can change the studio default.