When a cash-basis balance sheet in QuickBooks Online shows accounts receivable or accounts payable, Intuit's help points to two causes. Either an invoice or bill contains a line posted to a balance sheet account, such as sales tax, a deposit, a retainer or a fixed asset, or a payment has not been applied to the invoice or bill it settles. The first kind does not affect the profit and loss report, and Intuit's guidance is to leave it for the accountant. The second is a bookkeeping error and should be fixed. The skill is in telling them apart, which takes one report and a short review.
Why the problem exists
A cash-basis balance sheet should not show accounts receivable or accounts payable, because those accounts track open invoices and unpaid bills. Intuit's help names two usual causes when they do appear.
The first is an invoice or bill line posted to a balance sheet account. Intuit explains that the balance appears as soon as the transaction is saved and stays until the invoice or bill is paid. The second is a payment that has not been applied to an invoice or bill. An unapplied customer payment or bill payment reduces A/R or A/P on its own, with no invoice or bill to set it against.
Find out which kind you have
Intuit's help gives the route, and it works for both kinds:
- Run the Balance Sheet on a cash basis, for the period end you are checking.
- Click the amount for Accounts Receivable (A/R), or Accounts Payable (A/P), to open the transaction report behind it.
- Choose Customize, and under Columns, group by Customer or Supplier.
- Review each customer or supplier with a balance.
Then look at the transactions under each name, against the two causes below.
Kind 1: balance sheet lines on invoices and bills
Examples, based on Intuit's help:
- Sales tax, GST, HST or VAT charged on invoices, posted to a tax payable account;
- Security deposits or retainers invoiced to a customer and posted to a liability;
- Fixed asset purchases entered as bills, posted to an asset account;
- Items mapped to a balance sheet account. Intuit advises checking that service, non-inventory and other charge items point to income or expense accounts. Sales tax and retainer items may legitimately use balance sheet accounts.
What to do. Intuit's guidance is that these balances do not affect the profit and loss report and can be left where they are. Intuit says it is not a good idea to try to correct them with a journal entry, especially for sales tax. The accountant can deal with them when the taxes are prepared. Only if you decide to adjust, Intuit describes a journal dated at the period end and reversed the next day, and advises consulting an accountant first. In practice:
- Leave them if the cash-basis report is for internal use and the reader understands them.
- Leave the adjustment to the tax preparer where the cash-basis balance sheet is used for a tax return. If a reporting-date journal is wanted, agree it with the accountant first, date it at the period end and reverse it the following day, as Intuit describes.
- Fix the setup where the cause is an item mapped to a balance sheet account that should post to income or expense. That one is an error, not a feature.
Kind 2: payments not applied
A customer payment recorded without being applied to the invoice it settles, or a bill payment not applied to its bill, leaves the receivable or payable out of step. It can also happen when the payment is real but the invoice or bill was never entered.
How to spot it. In the grouped transaction report, a customer with an invoice and a payment of similar amounts that do not net to zero, or a payment with no invoice at all. The Customer Balance Detail and Supplier Balance Detail reports show the same picture by name.
What to do. Following Intuit's steps:
- Customer payments: open the payment from the customer's sales transactions, tick the invoice under Outstanding Transactions, and save.
- Bill payments: open the bill payment and add it to the bill it settles.
- Missing invoice or bill: enter it, dated correctly, then apply the payment to it.
Unapplied payments are worth fixing whatever basis the reports are run on, because the invoice or bill they settle still shows as open.
Should you worry about the balances that remain?
After fixing unapplied payments and setup errors, any remaining cash-basis receivable or payable should be explainable as balance sheet lines on open invoices and bills. A reasonable test: list them, and make sure each one is a tax, deposit, retainer or asset item you can name. If anything remains that you cannot name, treat it as an unapplied payment or setup error still to be found.
If cash-basis reports are used for a tax return, make sure whoever prepares it knows what any remaining balance represents. The adjustment for it should be a decision, not a surprise.
Where this fits
Unapplied payments also leave paid invoices showing as open. See paid invoices still showing in QuickBooks A/R ageing and our QuickBooks cleanup checklist.
Wissen Solutions reviews cash-basis and accrual reports and resolves the balances behind them as part of our QuickBooks Online and offshore accounting services.
Sources (checked 26 October 2026; Intuit updates the interface periodically and regional editions use different labels)
- Intuit: Resolve accounts receivable or accounts payable balances on a cash basis balance sheet in QuickBooks Online: causes, Transaction Report grouping, applying payments, reversing journal
- Intuit: Resolve A/R or A/P balances on a cash basis balance sheet (QuickBooks Desktop): why A/R and A/P should not appear, items linked to balance sheet accounts