Inventory on cash basis balance sheet

A question about preparing a cash basis balance sheet.

Is inventory shown on cash basis balance sheet?

"Inventory. Not used for the cash basis or the modified cash basis, since these purchases are charged directly to expense; however, many cash basis companies prefer to include it. Used under the accrual basis."

https://www.accountingtools.com/article ... sheet.html

What is said there seems to be very inconclusive. So is there a guideline to determine if the inventory of a business should or should not be reported on its cash basis balance sheet?

"Hybrid method.

Generally, you can use any combination of cash, accrual, and special methods of accounting if the combination clearly reflects your income and you use it consistently. However, the following restrictions apply.

* If an inventory is necessary to account for your income, you must use an accrual method for purchases and sales. See Exceptions under Inventories, later. Generally, you can use the cash method for all other items of income and expenses. See Inventories, later.
[...]"

https://www.irs.gov/publications/p538#e ... 1000270636

When there's inventory, show it.

Thank you guys.

Two more questions (Sorry, I have to admit I am quite weak in the accounting area):

(1) Based on what I read, 'other currently liabilities' are not shown on a cash basis balance sheet either. Am I correct?

(2) I saw a sample cash basis balance due on the internet. Other than 'cash on hand' and the owner's equity items, the only other entry is 'sales tax payable'. So is 'sales tax payable' the only exception that has to be reported on a cash basis balance sheet even though it is a current liability?

Thank you again.

There are other current liabilities that should be shown on a cash basis balance sheet. I would consider the more common cash basis liabilities: (besides debt)

A/P against the inventory shown
Credit card liabilities
Retirement withholdings
Payroll tax withholdings

Agreed, tho' I don't recall ever showing AP, I'd just deduct inventory not paid for.

The sales tax collected by your client and not yet remitted should be shown as a liability.

When considering a cash basis balance sheet, you show liabilities, but not accruals.

For example, when you collect sales tax, you have a liability to a tax collection agency. There is no income or expense item to accrue, in this case. When you receive a bill, you accrue the expense as of the bill date and recognize it when paid for cash basis purposes.

dr cash
cr sales
cr sales tax payable

Thank you again guys.

I understand balance owed to suppliers are generally considered 'account payable' and therefore it does not show up on a cash basis balance sheet.

However, I think only liabilities to be paid off in less than one year are considered 'account payable'.

So if there is a balance due to a supplier that has been owed for more than one year, would it have became a 'long term debt' and therefore is to be reported on a cash basis balance sheet? (Note that the original term of payment was less than one year. The business owner has financial problem which has caused the balance to become past due for more than a year)

Only if and when it gets turned into something other than an open AP. Like a note, for example.

The cash basis liability concept does not consider the length of time/when it is paid. No A/P to a supplier (unless it is inventory) is to be deducted until it is paid.