Cash Vs Accrual Flashcards
What is the Balance Sheet Rollforward equation?
Beginning balance
(+) what increases the account
(-) what decreases the account
= Ending Balance
What increases and decreases Accounts Payable?
(+) invoices received (we owe)
(-) invoices paid (money going out)
What increases and decreases Unearned Revenue?
(+) payment received for revenue we can not recognize (deposit of a new customer)
(-) when we invoice that job at completion (recognize the revenue)
What increases and decreases Wages Payable?
(+) wages earned but not yet paid (days worked in the pay period)
(-) paid wages (on pay day)
What increases and decreases prepaid rent?
(+) rent payment made ahead (Jan 1 for January)
(-) rent used (Jan 31st, all rent used up)
What increases and decreases Accounts Receivable?
(+) credit sales
(-) payment collected
On account, means what?
Accrual
If you are given _______ information, that means it is on ______ basis
Balance sheet
Accrual
What increases & decreases prepaid expense?
(+) paying vendor in advance
(-) uses the expense
What increases & decreases accrued liabilities?
(+) receive invoice from Eureka
(-) pay Eureka invoice
If cash basis is more than accrual basis, then
There will be a negative impact on the accrual expense (less)
So deduct these less amounts from the cash basis to get to the accrual-basis amount
What does it mean to have a “modified”
Revenue & expenses are on the cash basis
But also have balance sheet accounts. ONLY have balance sheet accounts if on the accrual basis
What increases & decreases rent receivable?
(+) rent revenue recognized
(-) payment collected
(-) write-offs
Cash to Accrual basis how does A/R affect it?
if A/R increases, we add it (we sold more on credit)
If A/R decreases, we subtract (we collected more payment than sold on credit)
Cash to Accrual Basis Bridge; how does A/P affect it?
If A/P increases, then it would be a negative change (we charged more than we paid out)
If A/P decreases, then it would be a positive change (we paid more than we charged)
Cash to Accrual Bridge: A/R
IF increases from year 1 to year 2 then more credit sales was recognized than cash collected (add bc more accrual recognized than cash collected).
If decreases from year 1 to year 2 then more cash was collected than charged sales was recorded (subtract bc more cash was collected)
Cash to Accrual Bridge: A/P
IF increases from year 1 to year 2 then the company charged more to vendors than paid out (subtract bc more expense should be recorded than cash went out)
If decreases from year 1 to year 2, then company paid more to vendors than was invoiced, add bc more cash out of hand than invoices recorded)
What is the interest payable rollfoward?
Beginning balance
(+) interest expense accrued according to the note terms
(-) interest expense paid
= ending balance
Accrual to Cash bridge:
How does change in A/R and A/P affect this?
IF A/R goes up, then less money in and more invoices given to customers so cash goes down (deduct the difference)
IF A/R goes down, then more money in than invoices given to customers, so cash goes up (add the difference)
IF A/P goes up, then we received more invoices than paid, so cash goes up (add the difference)
IF A/P goes down, we paid more bills than invoices received so cash goes down (deduct the difference)
What impacts inventory and how..
Increases when semi is dropped off
Decreases when OSW trucks go on route
What is the inventory rollforward equation?
Beginning inventory balance
(+) materials purchased
= COG availabe for sale
(-) cogs
= ending inventory balance
What rollforward goes with the inventory rollfoward?
Which one must be completed first?
Accounts Payable
Inventory
If A/R increases, what does NCF do?
Decreases bc we didn’t collect money from customers only let them charge our inventory
If A/R decreases, what does NCF do?
Increases, bc we collected more cash from customers than we allowed to be charged.
