Recording Your Bills by Writing Cheques

When you record bills by writing cheques, you’re doing cash-basis accounting. In a nutshell, this means that you account for bills as expenses when you write the cheque to pay the bill.

We talk a little bit about cash-basis accounting in Appendix B, but we’ll tell you here that a trade-off is implicit in the choice to use cash-basis accounting. If you use cash-basis accounting, you greatly simplify your bookkeeping, but you lose precision in your measurement of your expenses. And you don’t keep track of your unpaid bills inside QuickBooks. They just stack up in a pile next to your desk.

As long as you understand this trade-off and are comfortable with it, you’re ready to begin using this method, which you do by following the steps we provide in the paragraphs that follow.