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    tqstudent's Avatar
    tqstudent Posts: 8, Reputation: 1
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    #1

    Jan 22, 2011, 07:55 PM
    Cash Basis Accounting Question
    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's Avatar
    Just Looking Posts: 1,610, Reputation: 480
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    #2

    Jan 22, 2011, 08:15 PM

    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.
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    #3

    Jan 22, 2011, 08:25 PM
    Thank you for the hints... I think it should be:
    So 850K + 90K = 940K
    Is that correct?
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    #4

    Jan 22, 2011, 08:34 PM
    Comment on Just Looking's post
    Thank you for the hints... I think it should be:
    So 850K + 90K = 940K
    Is that correct?
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    #5

    Jan 22, 2011, 08:43 PM

    Not quite. The $90,000 addition is correct, but the $850,000 includes the $50,000 that was actually earned in the prior year.
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    #6

    Jan 22, 2011, 08:44 PM
    Comment on Just Looking's post
    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
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    #7

    Jan 22, 2011, 08:45 PM

    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.
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    #8

    Jan 22, 2011, 09:01 PM
    Comment on Just Looking's post
    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.
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    #9

    Jan 22, 2011, 09:08 PM

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

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