Hybrid or Modified Cash Basis Reporting
Most of our clients (and I imagine many small businesses in the U.S.) use a hybrid reporting basis. Basically, short term assets and liabilities are recorded using the cash basis while long term assets and liabilities are recorded using the accrual basis.
Therefore, for example, this will result in sales being recorded when cash received but depreciation and amortization expense are recorded monthly. This method of reporting also results in the accounting basis being more similar to tax basis.
Xero actually has a webpage describing this (https://www.xero.com/us/guides/cash-vs-accrual-accounting) but states "And if you run a hybrid accounting system, smart software will allow you to switch between cash basis and accrual basis whenever you need." I alternatively suggest that smart software will actually allow you to produce hybrid accounting reports.
Xero currently has two Accounting Bases: Accrual and Cash. Xero should have a third alternative of Hybrid (Modified Cash Basis).
Ted Orban
shared this idea
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James Wei
commented
+1 to this. I have a separate use case that I think would be solved by this kind feature. More specifically, I need a way to include non-cash expenses such as depreciation on my PnL and Balance Sheet but not on the Statement of cash flows. It looks like the only way I can do this right now is to switch to accrual basis accounting, but I use cash basis as it is sufficient for my business and would like to keep doing so. This limitation also means that I cannot use Xero features such as Bills and Invoices without fully switching to accrual basis.