On december 29, 2017, an employee received a $5,000 check from her employer's client. the check was payable to the employer. the employee did not remit the funds to the employer until december 30, 2017. the employer deposited the check on december 31, 2017, but the bank did not credit the employer's bank account until january 2, 2018. when is the cash basis employer required to include the $5,000 in gross income?

The cash basis of accounting recognizes revenue when it is received as cash, not when it is earned, as opposed to the accrual basis. The employer will recognize the revenue when cash is received. Since a check is considered equivalent to cash, it will recognize the revenue in its 2017 gross income.  The fact that the check did not appear in the employer’s bank balance until 2018 is not relevant, since the check is considered equivalent to cash, the employer receives the check before 2018. 

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