Your examination of the records of a company that follows the cash basis of accounting tells you that the company's reported cash basis earnings in 2012 are $36,962. If this firm had followed accrual basis accounting practices, it would have reported the following year-end balances.


2012 2011
Accounts receivable $3,772 $2,792
Supplies on hand 1,021 819
Unpaid wages owed 1,490 2,335
Other unpaid amounts 1,320 1,403


Determine the company's net earnings on an accrual basis for 2012.

What you do is adjust for the movements in the various balances

This is an incomplete exercise since under accrual accounting there will be other matters that need to be addressed; depreciation, prepayments, accrued expenses, uncollectable accounts

Thanks Paraclete for your response. I'm taking an online course in Financial Accounting through Wiley Plus and for the life of me I can't get this particular exercise. I agree it seems incomplete.

Accounts receivable $3,772 $2,792 debit revenue 990
Supplies on hand 1,021 819 debit expense 202
Unpaid wages owed 1,490 2,335 debit expense 845
Other unpaid amounts 1,320 1,403 debit expense 81

The adjustments all reduce the cash result