Basis of accounting
Each business chooses cash or accrual basis, and the choice drives reporting consistently across the ledger, reports, and the tax package. Accrual books support accrued expenses, accrued revenue, prepaid costs, and deferred revenue so the accrual result is real rather than cosmetic. Changing basis is a disclosed change in accounting method (ASC 250) — prior locked periods are not restated silently.
GAAP treatment by area
- Double-entry ledger. Every posting carries equal debits and credits; the trial balance is checked before a month can be closed, and variances are shown rather than absorbed.
- Revenue (ASC 606). Invoiced revenue is recognised when the performance obligation is satisfied; deposits and unearned amounts sit in deferred revenue until earned.
- Leases (ASC 842). Operating and finance leases are classified explicitly. Finance leases record a right-of-use asset and lease liability, with payments split between interest and principal and ROU amortisation flowing to the depreciation schedule. Future minimum commitments are disclosed by year.
- Inventory (ASC 330). Lot-level costing feeds cost of goods sold and the closing inventory value; physical counts tie the subledger to the general ledger.
- Fixed assets (ASC 360). Capitalisation, useful lives, and depreciation are tracked per asset, with tax-only elections (§179, bonus) kept separate from book depreciation.
- Payables and receivables. Open bills and unpaid invoices are subledgers that must tie to the matching control accounts each month.
- Book-to-tax differences. A Schedule M-1 style reconciliation explains why book profit differs from taxable profit (meals at 50%, depreciation timing, accruals, penalties).
Internal controls
- Month-end close checklist with reconciliation, exception review, and an owner attestation.
- Period locks: once a month is closed, postings into it are blocked at the database level.
- Immutable audit trail recording who changed what and when, including permission changes.
- Segregation of duties through business roles (owner, manager, bookkeeper, viewer).
- Materiality and variance thresholds so unexplained differences surface instead of netting out.
Tax and payroll rules
- Federal withholding follows IRS Publication 15-T percentage-method tables; FICA and unemployment wage bases are versioned by year.
- Mileage and travel follow IRS Publication 463 substantiation rules, with per-diem and standard-rate options.
- Deductibility follows IRS Publication 535 conventions, including the 50% meals limitation.
- Contractor reporting applies the $600 1099-NEC threshold with W-9 tracking.
- Sales tax is tracked by jurisdiction with filing frequencies and due dates; rates are reference data you confirm, not a certified tax engine.
Data, privacy and payments
- Records are retained for at least seven years to match IRS recordkeeping expectations, and are exportable as JSON or CSV at any time.
- Privacy handled under GDPR and CCPA principles, with a DPA and subprocessor list published.
- Card data never touches our servers — payments run through Stripe (PCI-DSS Level 1).
- Bank connections are read-only and tokens are never exposed to the browser.
What we do not claim
- Hate Ledger is not a CPA firm. Reports are worksheets and estimates, not filed returns or an audit opinion.
- We are not an IRS-authorised e-file provider on our own; e-filing is performed through a partner where offered.
- No SOC 1 or SOC 2 report is currently published; the security posture page describes controls we operate ourselves.
- Non-US users get local tax-calendar and currency support, but reporting is modelled on US GAAP rather than IFRS.
This page is app-owned editable content maintained by Hate Ledger to answer common questions about the service. It is not an independent certification. For anything binding or company-specific, email services@hateledger.com.