Special Purpose – Converting Cash To Accrual

Question 1

Which of the following adjustments is necessary to convert cash receipts to revenue as reported on an accrual basis?

Answer 1

Subtract ending contract liability from cash receipts from customers

Contract liability is the same as deferred revenues, and represents cash collected in advance of revenue being earned

Question 2

What is the formula to adjust service revenue from cash basis to accrual basis?

Answer 2

Service revenue =
cash fees collected
+ End. AR - Beg. AR
+ Beg. Unearned fees
- End. Unearned fees

Question 3

Income tax basis, financial statements, differ from those prepared under GAAP in the income, tax basis, financial statements

Answer 3

Recognize certain revenues, and expenses and different reporting periods

Two accounting methods are used for income tax basis
1 modified cash basis, hybrid method of IRS

2 accrual basis – IRS

Question 4

What are the other comprehensive basis of accounting types?

Answer 4

Income tax basis
Cash basis
And modified cash basis
* not accrual accounting