Simply Accounting

[krabsen]

Ted Darling: I want to set up my Simply Accounting program (version 6)in the accrual mode for my farm record keeping. Perhaps you can give me some pointers on just how I can set this up or will it be a bean counters nitemare. At present I am still using the old simply on windows 3.1 and is about a 1990 version in the cash mode.

[tdarling]

If you've been successful with cash accounting using Simply Accounting 3.1 and have been able to reconcile your bank statement to your computer records, then you've accomplished a lot. Simply Accounting hasn't been an easy program to work with, but versions 6 (and now 7) is much better than the old ones. I'd suggest that moving to an accrual accounting system from a cash-based one should be a gradual process, not a giant leap. I've mentioned bank statement reconciliation; make sure that you're doing this each month to prove that your system is in balance. Simply Accounting's account reconciliation module should make this quick and easy. The next step you could take is to make accrual adjustments to your year-end cash income statement so that it becomes a Net Income Statement. The adjustments I'm talking about are inventories (product and supply), accounts receivable, accounts payable and depreciation. You can do this within your Simply Accounting program (it will be tricky) or by creating a separate Net Income Statement using a spreadsheet or a calculator. Once you've got this mastered, you will have an accurate picture of your financial and economic progress for the year. This is a major step forward! The next step would be to add balance sheet information such as machinery, building and land values as well as the details of all loans. This information will allow you to create a year-end balance sheet, which provides a financial snapshot of the health of your business. There are complications here, however. They include handling depreciation and gains or losses on capital sales. So far, the system I'm describing is really a cash system with year-end accrual adjustments. To make the first step toward true accrual accounting, you might use Simply Accounting's sales and purchases modules to set up Accounts Receivable and Accounts Payable. This is another major step forward, especially for someone who sells to many customers or who offers terms of payment. This approach provides a complete and up-to-date financial picture. It can also provide a 'sales report' for each type of commodity sold, again providing an increased level of management information. The final step to 'full accrual' would be to change the 'periodic' inventory system described above to a 'perpetual' one. This allows you to print financial statements at any time without making any adjustments. Most farm record systems don't get this far because of the complications involved, especially when dealing with issues like breeding livestock inventories. However, this type of 'full accrual' system is closer to Generally Accepted Accounting Principles (GAAP) and may be the system of the future. Please contact me if I can help further.