[tqstudent]

A company uses cash basis of accounting. Company collected $850,000 from its customers during 2010. Customers owed Slaughter $50,000 of accounts receivable at the beginning of 2010, and $90,000 of accounts receivable at the end of 2010. What is Slaughter's sales revenue for 2010 under the accrual basis of accounting?

[Just Looking]

Under the cash basis, you only report actual receipts. When the $50,000 in A/R was received, it was shown as part of the $850,000. The $90,000 has not been received, so it is not shown in the $850,000. Using this explanation, can you figure out the revenue using the accrual basis. Give it a try. If I see what you are doing, it gives me a better feeling for what you do or don't understand. Thanks.

[tqstudent]

Thank you for the hints... I think it should be:
So 850K + 90K = 940K
Is that correct?

[tqstudent]

Thank you for the hints... I think it should be:
So 850K + 90K = 940K
Is that correct?

[Just Looking]

Not quite. The $90,000 addition is correct, but the $850,000 includes the $50,000 that was actually earned in the prior year.

[tqstudent]

I am getting confused, because 50K was collected in cash basis accounting (present year), but in accrual basis it was reported in prev year...
850,000.00 Cash during 2010
50,000.00 - 90,000.00 = 40k
40k + 850k = 890K

[Just Looking]

That's right. Do you completely understand it now?

The $50,000 was earned in the prior year. The $90,000 was earned in the current year.

[tqstudent]

Yes I do. After my 1st response, I started to think... and I had to walk away from my computer. Lol.
I appreciate your help. This is a great site.

[Just Looking]

Good. Thanks for working with me and for the appreciation expressed. :)