You may find that if you run a Trial balance and Profit and Loss Report comparison using an Accrual basis that Xero matches with your source data.
However, if you compare the reports on a Cash Basis you may see some discrepancies. This is due to system differences between the source software and Xero, and how certain transactions are recognised. Due to the way each accounting program captures data, in some instances, it is impossible to get one accounting package to perform like another.
Let's look at Credit Notes as an example:
The source file applies credit notes on any date the user chooses. The result if CASH Accounting is used, is that the applied date is the date that the CN and GST is recorded as being credited by the user.
For example, a Sales Invoice has been created in February, the Credit note issued in March and then applied in April. The result is that the allocation (and GST credit for Australia & New Zealand) is not recognised until April.
Xero works off the later of the dates of the invoice and credit note.
With the example given above, the sales invoice is created in February and a Credit note issued in March. Therefore payment (credit) is applied in March also. The result is that the applied date (and the GST credit for Australian files) is recognised in March and not April as it was in the source data.
With this example, when comparing the Cash and Accrual reports you will see a difference.
Another example is a prepayment of an invoice:
In your source file, the prepayment is recognized as Receivable/Payable at the time of payment which is a Balance Sheet account.
In Xero the prepayment is recognized as Income/Expense at the time of payment which is an Income Statement/Profit and Loss account.
This means that a Trial Balance run on a Cash basis will show a discrepancy whereas a Trial Balance ran on an Accrual basis will not.
Our conversion process:
The conversion replicates the Xero method of applying the Credit note, so the figures in the Cash versus Accrual reports can be impacted due to these timing differences.
For Australian conversions, we enter compensating transactions to match the GST balances in the source file so the figures will be the same if compared on an Accrual basis.
We cannot make cash reporting behave in Xero as the cash reporting in the source file due to the different ways each system caters for these transactions.
Please be assured that the data has been converted as per the source data, and a check using Accrual accounting will quickly confirm this.
For Australian clients,
here is more information
about the differences between BAS and the balance sheet if run on a different accounting basis.
Do not make any changes to the data in Xero based on a comparison using a Cash basis or you will impact the integrity versus the source accounting software.