Cash Basis Versus Accrual Basis Accounting

Learn the differences between Cash Basis and Accrual Basis accounting and how both function in Campspot.

The two main methods of accounting are cash basis and accrual basis. Financial reports that provide your park's data using both methods are available in Campspot. The financial reports (journal entries) you use will depend on which style of accounting your park uses - either Cash Basis or Accrual Basis. 

Defining Cash Basis and Accrual Basis Accounting 

Cash Basis: A method of recording accounting transactions for revenue and expenses only when the corresponding asset is received or payments are made.

Example: Money received today for a reservation in the future is counted as revenue today.

Accrual Basis:  A method of recording accounting transactions for revenue when earned and when expenses are incurred. 

Example: Money received today for a reservation in the future will be counted as revenue when the reservation takes place.

Below, we'll review how each of these accounting methods work specifically in Campspot. 

How Cash Basis Accounting Works in Campspot 

Cash Basis payments in Campspot are applied to invoice items/their corresponding revenue accounts based on percentages. If a guest has paid 100% of their reservation, cash basis Journal Entry reports will show each item as fully paid. If a guest has not paid 100% of their reservation, the system takes the percentage that they did pay and counts that toward each invoice item.

With cash basis payments being applied in percentages, this may cause you to see numbers on your Journal Entry that are not whole numbers when there are reservations that have not been paid in full.

Cash Basis Accounting on Fully Paid Invoices 

If a guest has paid 100% of their reservation, cash basis Journal Entry reports will show each item as fully paid.

Example: The invoice total is $100.00 and consists of $75 for a nightly stay and $25 for a deposit. The guest has currently paid $100.00. A Journal Entry report would show the following:

• $75 credit to the revenue account corresponding with the nightly stay
• $25 credit to the revenue account corresponding with the deposit 
• $100 debit to the designated asset account 

The image below shows what this one example would have looked like on a cash basis Journal Entry report: 

Cash Basis Accounting on Partially Paid Invoices 

If an invoice has not been paid in full, the system takes the percentage that was paid and allocates that percentage toward each invoice item/account.

Example: The invoice total is $100.00 and consists of $75 for a nightly stay and $25 for a deposit. The guest has currently paid $50.00 (50%). Instead of $50.00 being applied to the highest charge first, Campspot splits the $50 among each charge. A Journal Entry report would show the following:

• $37.50 credit (50% of $75.00) to the revenue account corresponding with the nightly stay
• $12.50 credit (50% of the $25.00) to the revenue account corresponding with the deposit. 
• $50 debit to the corresponding payment asset account 

The image below shows what this one example would have looked like on a cash basis Journal Entry report: 

Cash Basis Accounting on Edited Invoices 

If an invoice has been paid in full and then additional charges are added to it and are not paid for when added (causing the invoice to no longer be paid in full) Campspot will reallocate money to the corresponding revenue accounts based on the percentage of the new total paid.

Example: The invoice total is $330.92 and consists of $305 for a weekly stay and $25.92 for taxes. The guest has currently paid the full $330.92. A week after the day the guest originally booked the reservation (also before the reservation arrival date), a $50 charge for a utility deposit is added to the reservation but is not paid for at that time. 

This then causes the invoice to be paid only 86.8% given the new total and the total amount paid to date. In this case, cash basis accounting in Campspot splits the paid $330.92 (86.8%) among each invoice item so that they are each partially paid. 86.8% of the total payment will now be applied to each invoice item, including the new $50 charge. A Journal Entry report viewed on the day that the $50 charge was added would show following: 

• $40.03 debit (13.2% of $305.00) from the revenue account corresponding with the weekly stay
• $3.40 debit(13.2% of $25.92) from the revenue account corresponding with the taxes
• $43.43 credit (86.8% of $50.00) to the revenue account corresponding with the utility deposit

The images below show what this example would have looked like on a Journal Entry. The first image is for the first transaction and the second image is on a later date after the $50 charge was added. 

 

This reallocation of money that takes place is important to note because it may be shown on a Journal Entry Construction (Cash Basis) as negative numbers. This happens when money is moved from one financial account to another based on the way that cash basis accounting splits the total paid. In this case, seeing a negative number does not indicate that a refund took place but rather that money was moved between accounts. 

The image below shows a snippet of what the above example would look like on the Journal Entry Construction (Cash Basis). Please note that because this is for a 7 day reservation, the amounts moved between accounts are listed by day rather than for the 7 day total. 

How Accrual Basis Accounting Works in Campspot 

Accrual Basis payments in Campspot are applied to invoice items/their corresponding revenue accounts when the reservation starts. Payments are applied proportionally after each day of the stay. For example, a reservation that is three days long will have 1/3 of the revenue recognized on each day of the stay.

Accrual Basis Accounting on Fully Paid Invoices 

If an invoice has been paid in full, multiple transactions will show on the Journal Entry report that will indicate your campground received full payment.

Example: A guest makes a seven-night cabin reservation today with an arrival date a month from now. The invoice total is $1007.00. This includes $700.00 for cabin revenue, $250.00 for golf cart revenue, and a $57.00 sales tax liability. The guest has currently paid the full $1007.00. An accrual basis Journal Entry report for the day the reservation was made would show the following: 

• $1007.00 debit to the corresponding payment asset account 
• $1007.00 credit to the prepaid deposit liability account 
• $1007.00 debit to the accounts receivable asset account 
• $1007.00 credit to the deferred revenue account 

The image below shows what only this transaction would look like on an accrual basis Journal Entry report: 

Note: If the campground uses separate deferred revenue accounts for the cabin, golf cart rental and sales tax they would see the money broken out into separate deferred revenue accounts on a detailed Journal Entry report. 

As the reservation takes place, Campspot would record proportional partial payment for each night of the reservation. 

Example: 1st Night 

• $143.86 (1/7 of $1007.00) debit to the prepaid deposit liability account 
• $143.86 (1/7 of $1007.00) credit to the accounts receivable asset account
• $100.00 (1/7 of $700.00) credit to the cabin revenue account 
• $35.71 (1/7 of $250.00) credit to the golf cart revenue account
• $8.15 (1/7 $57.00) credit to the sales tax liability account 
• $143.86 (1/7 of $1007.00) debit to the deferred revenue account 

The image below shows what only this transaction would look like on an accrual basis Journal Entry report: 

For each subsequent night of the reservation the same transactions would take place and show on the Journal Entry report for that date. The only difference would be the tax amount would decrease by one penny on 3rd-7th nights in order for the amount to round out correctly. By the end of the the stay the campground would have $1007.00 in assets recorded for the $950.00 of revenue earned and for the $57.00 collected for tax liability. 

Accrual Basis Accounting on Partially Paid Invoices 

If an invoice has not been paid in full, multiple transactions will show on the Journal Entry report that will indicate that your campground received partial payment and is also is owed money for the reservation.

Example: A guest makes a two-night reservation today with an arrival date a month from now. The invoice total is $200.00 for the two nights. The guest has currently paid $50.00. An accrual basis Journal Entry report for the day the reservation was made would show the following:

• $50.00 debit to the corresponding payment asset account 
• $50.00 credit to the prepaid deposit liability account
• $200.00 debit to the accounts receivable asset account
• $200.00 credit to the deferred revenue account

The image below shows what only this transaction would look like on an accrual basis Journal Entry report:

Assuming the guest pays the remaining balance of $150.00 at the time of check in, the payment asset account used will be debited by $150.00, the prepaid deposit liability account would be credited by $150.00 and the accounts receivable and deferred revenue accounts would remain unchanged. This would display on the Journal Entry report for the day of payment. 

As the reservation takes place, Campspot would record proportional partial payment for each night of the reservation. 

Example: 1st Night 

• $100.00 debit to the prepaid deposit liability account 
• $100.00 credit to the accounts receivable asset account
• $100.00 credit to the corresponding payment asset account 
• $100.00 debit to the deferred revenue account 

The image below shows what only this transaction would look like on an accrual basis Journal Entry report: 

For the second night of the reservation the same transactions would take place and show on the Journal Entry report for that date. By the end of the the stay the campground would have $200.00 in assets recorded for the $200.00 revenue earned from the reservation. 

Exceptions To The Rules - Utility Metering, POS Charge to Site and Miscellaneous Charges

Campspot has three categories of additional charges that can be added to an invoice by a CSR after it has been confirmed. These categories are Miscellaneous Charges, Utility Charges (such as electric metering) and Charge to Site charges from Point-of-Sale receipts/transactions.

Utility Metering and POS Charge to Site Charges

As mentioned previously, Campspot proportionally applies payments to charges on a cash basis but there are two exceptions to that rule; utility meter charges and POS charge to site charges. 

POS charge to site and utility metering charges are paid first when a payment is applied. If either of these two types of charges are added to a reservation after the most recent payment has been applied, they will remain “unpaid” until the next payment is made. In other examples of cash accounting (described above) we know that when new charges are added payments are reallocated based on the percentage paid. These charges are the only ones that do not cause the system to function that way. 

Miscellaneous Charges

Miscellaneous Charges can be set to be applied on the ‘Invoice Add Date’ (cash basis) or ‘Reservation Start Date’ (accrual-basis).

It is important to note that it is possible to create Miscellaneous Charges set to be applied using the ‘Invoice Add Date’ even if your parks uses the accrual basis accounting method, however, those charges will be paid first and the revenue will be recognized on the date the charge(s) were added to the invoice.