I came across this thread, which is on the subject of cash vs accrual accounting, but I don’t think answers the query I have, which is:
- Does Simple Fund 360 accommodate the need for cash accounting?
To give my question some context, the primary investment made by my SMSF is lending money. When money is lent, the SMSF calculates interest daily, then capitalises that accrued interest in the last day of each calendar month.
The borrower does not necessarily make repayments on or before the date on which interest capitalises. In fact, a borrower may not make a repayment for some time.
SMSF accounting software which I used previously treated any billed interest, ie. the interest that capitalises (if not repaid) on the last day of each calendar month, as income. A problem with that is that the SMSF pays income tax on earnings not yet received. Cash accounting is more advantageous on that note, and so far as I know there is no reason why an SMSF can’t report earnings to the ATO on the basis of cash accounting.
Capitalised interest should reflect in an increased balance of the loan, so that the balance sheet of the SMSF at any given point should accurately reflect the SMSF’s value, at least to the extent of capitalised interest at the end of each calendar month.
So, would Simple Fund 360 accommodate my need?