AccountEdge records transactions using accrual accounting, but certain reports can be displayed on a cash basis. When you choose Cash Basis on a Profit & Loss or Balance Sheet, AccountEdge creates report-only adjustments so the report is closer to income actually received and expenses actually paid.

The two lines that often create questions are:

At a high level, Cash Basis reporting is trying to answer: What income was actually received, and what expenses were actually paid during this report period?

Cash Basis Net Profit =
Cash-basis income
- Cash-basis cost of sales
- Cash-basis expenses
+/- Cash-basis other income/expense

On the Cash Basis Profit & Loss, AccountEdge may show normal income and expense lines adjusted for cash activity, plus ADI and ADE accumulators.

Total Cash Income = Cash-adjusted income lines + ADI
Total Cash Expenses = Cash-adjusted cost/expense lines + ADE

Note: ADE can be negative. A negative ADE reduces Total Expenses.
Note: ADI can be positive. A positive ADI increases Total Income.

ADI is not a single General Ledger account. It is a report accumulator. Use this as the practical reconciliation formula:

ADI =
cash received during the report period for prior-period or historical sales
- current-period sales/income that has not been collected by the report end date
+/- customer discounts, settled credits, credit refunds, and customer deposit transfers
+/- net movement in linked accrued asset accounts that AccountEdge backs out
- non-income portions when applicable, such as sales tax, tips, clearing amounts, or other non-P&L portions

In plain English: ADI explains the difference between income recorded because an invoice exists and income that should appear because customer cash was actually received.

ADE is also a report accumulator, not a General Ledger account. Use this as the practical reconciliation formula:

ADE =
cash paid or cleared during the report period for prior-period bills/liabilities
- current-period bills, expenses, tax liabilities, or payroll liabilities not paid/cleared by the report end date
+/- supplier discounts, settled debits, debit refunds, and supplier deposit transfers
+/- payroll, sales tax, and other linked liability/equity-account timing
+/- net movement in linked accrued liability/equity accounts that AccountEdge backs out

In plain English: ADE explains the difference between expenses recorded because a bill or liability exists and expenses that should appear because cash was actually paid or a linked liability was cleared.

Cash Basis reporting depends heavily on linked control accounts. AccountEdge follows the accounts selected in Linked Accounts and tax/payroll setup. It does not judge whether an account is conceptually correct for the business.

Important: A transaction type listed as "not adjusted" can still affect ADI or ADE indirectly if it changes the balance of a linked account that Cash Basis reporting backs out. For example, a journal entry that clears Sales Tax Payable can change the linked liability balance used in ADE, even though the journal entry itself is not treated like a normal Bill or Pay Bill transaction.

Sales tax often surprises customers because it is created by sales, not bills. A taxable sales invoice can credit Sales Tax Payable:

Taxable sale:
Debit: Accounts Receivable or Bank
Credit: Sales Income
Credit: Sales Tax Payable

Sales tax remittance:
Debit: Sales Tax Payable
Credit: Checking

Because Sales Tax Payable is a linked liability account, unremitted or timing-difference sales tax can appear in ADE on the Cash Basis Profit & Loss.

Historical sales and purchases themselves may not create cash impact inside the report period, but their payments do. This matters after a conversion from another accounting system.

If open Accounts Receivable is brought in as historical or opening-balance invoices, then customer payments received after conversion can appear in ADI. If open Accounts Payable or tax/payroll liabilities are brought in, then payments or clearings after conversion can appear in ADE.

Conversion example: A customer invoice dated before the report period is paid during the report period. The cash was received now, so Cash Basis reporting may add the income portion through ADI even though the original invoice was not current-period sales income.

ADI and ADE are accumulators shown on Cash Basis reports. They are not accounts you can post to, reconcile, or drill down like a normal General Ledger account. To explain them, compare Cash vs Accrual reports and review the linked account activity behind the report.