Special Purpose Frameworks

Question 1

What is the formula to convert cash basis revenue to accrual basis revenue?

Answer 1

Formula
Cash basis revenue
\+ Ending AR                    ACCOUNTS RECEIVABLES
- Beginning AR
- Ending unearned income      

Accrual basis revenue

Question 2

What is the formula to convert cash paid for purchases to cost of goods sold?

Answer 2

Formula
Cash paid for purchases
\+ Ending AP                           AP
- Beginning AP
- Ending inventory                INVENTORY

Cost of goods sold

Question 3

What is the formula to convert cash paid for operating expenses to accrual basis operating expenses?

Answer 3

Formula
+ Ending accrued liabilities ACCRUED EXPENSES
- Beginning accrued liabilities
- Ending prepaid expenses

Accrued basis operating expenses