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Do you have to accrue for paid time off if you are cash based?

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Philipp Suchan
Title: Product Marketing Manager
Company: Intacct Corporation
LinkedIn Profile
(Product Marketing Manager, Intacct Corporation) |

When you are cash based the concept of accruals does not apply.

But I don't quite understand your question, particularly how it relates to paid time off. Normally under accruals accounting what would happen is that you accrue for payroll if your month end straddles the pay period, e.g. month-end 12/31 and pay period 12/18 - 01/01. Paid time off should not affect this accruals calculation.

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

The OP is asking if they have to book a liability for a time off accrual if they are using cash basis accounting.

Would need more information to answer but, it would be employment law that requires the PTO accrual if that is part of the organization's contractual employment obligation. And, it that case GAAP would require accrual basis accounting.

You might get by with cash basis for income tax purposes. But, using other than an accrual basis accounting system when you have material liabilities or assets would create a timing mismatch for revenues and expenses.

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