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    Cash Base VS Accrual Base

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    Cheryl Fuentes
    The document discusses the differences between cash basis and accrual basis accounting. Under the cash basis, revenues are recorded when cash is received and expenses when cash is paid out. The accrual basis records revenues when earned and expenses when incurred, regardless of when payment is made. The document then provides examples of accounting entries for sales, purchases, income, expenses and retained earnings under both the cash basis and accrual basis.

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    Cash Base VS Accrual Base

    Uploaded by

    Cheryl Fuentes
    84 views8 pages
    The document discusses the differences between cash basis and accrual basis accounting. Under the cash basis, revenues are recorded when cash is received and expenses when cash is paid out. The accrual basis records revenues when earned and expenses when incurred, regardless of when payment is made. The document then provides examples of accounting entries for sales, purchases, income, expenses and retained earnings under both the cash basis and accrual basis.

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    Original Title

    CASH BASE VS ACCRUAL BASE

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    The document discusses the differences between cash basis and accrual basis accounting. Under the cash basis, revenues are recorded when cash is received and expenses when cash is paid out. The accrual basis records revenues when earned and expenses when incurred, regardless of when payment is made. The document then provides examples of accounting entries for sales, purchases, income, expenses and retained earnings under both the cash basis and accrual basis.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    84 views8 pages

    Cash Base VS Accrual Base

    Uploaded by

    Cheryl Fuentes
    The document discusses the differences between cash basis and accrual basis accounting. Under the cash basis, revenues are recorded when cash is received and expenses when cash is paid out. The accrual basis records revenues when earned and expenses when incurred, regardless of when payment is made. The document then provides examples of accounting entries for sales, purchases, income, expenses and retained earnings under both the cash basis and accrual basis.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 8

    CASH BASE VS ACCRUAL BASE

    CASH BASE:

    We record revenue when or during the time we receive the cash rather than when it is earned

    We record expenses when cash or during the time the cash is disbursed rather when assets are
    consumed.

    Accrual Base:

    We record revenue when such revenue is earned rather than when the cash is received.

    We record expenses when assets are consumed rather than when they are paid.

    We must solve for

    Sales

    Purchases

    Income other than sales

    Expenses

    Retained earnings

    SALES ON ACCOUNT
    TRADE ACCOUNTS RECEIVABLE AND NOTES RECEIVABLE END, XX

    COLLECTION OF A/R AND N/R XX

    SALES RETURNS AND ALLOWANCES XX

    A/R AND N/R WRITTEN OFF XX

    N/R DISCOUNTED XX

    A/R AND N/R END XX

    TOTAL XX

    A/R AND N/R BEG, (XX)

    TOTAL SALES ON ACCOUNT XX

    CASH SALES XX

    SALES UNDER ACCRUAL BASE XX


    TRADE ACCOUNTS RECEIVABLE AND NOTES RECIEVABLE

    DR. CR.

    BEG BALANCES COLLECTIONS

    SALES ON ACCOUNT XX SALES RETURNS AND ALLOWANCE

    A/R AND N/R WRITTEN OFF

    N/R DISCOUNT

    A/R AND NR END BAL.

    PURCHASES

    Cash purchases xx

    Purchases on account:

    Trade A/P and N/P end xx

    Payment A/P and N/P xx

    Purchase Ret. And Allo. Xx

    Total xx

    Trade A/P and N/P beg (xx)

    Xx

    PURCHASES UNDER ACCRUAL BASIS xx

    TRADE A/P AND NOTES PAYABLE

    Dr Cr.

    Trade A/P and N/P end A/P AND N/P BEG

    Payment A/P and N/P PURCHASES/ACCRUAL

    Purchase Ret. And Allo.

    N/P DISCOUNT

    A/P AND N/P END,


    DEFERRED AND ACCRUED INCOME

    DR. CR.
    INCOME OTHER THAN SALES (DADA BEEB)
    BEG. ACC INC. BEG. DEF INC.
    Income received in-cash basis xx
    ACCRUAL/INCOME CASH BASE INC.
    Add Deferred income-Beg xx

    Accrued income- End xx

    Total xx DEF. INC. END ACCRUED INC. END

    Less Deferred income- End (xx)

    Accrued income-Beg (xx)

    income for CY accrual base xx

    EXPENSES (PAPA – BEEB)

    Expenses paid- cash basis xx

    Prepaid Expenses- Beg xx

    Add Accrued Expenses- End xx

    Total xx

    Less Prepaid Expenses- End xx

    Accrued Expenses- Beg xx

    EXPENSES UNDER ACCRUAL XX


    RETAINED EARNINGS

    Retained Earnings Perbook/ end xx

    Add Unrecorded accounts receivable xx

    Unrecorded inventory xx

    Total xx

    Less unrecorded accounts payable (xx)

    Unrecorded accrued expenses (xx)

    Unrecorded depreciation (xx)

    Corrected retained earnings beg. Xx

    Increase in assets and decreases in liabilities affects income

    Increase in asset and Decrease in liabilities : increase in net asset


    Increase in liabilities and Decrease in asset: decrease in net asset
    1.

    A/R end 300,000

    Sales/ cash base 1,750,000

    Total 2,050,000

    A/R beg (500,000)

    Sales/ accrual 1,550,00

    2.

    6,000,000 –sales/ cash base

    1500,000- net decrease in liabilities

    2,000,000- net increase in assets

    9,500,000- sales/ accrual


    1.

    Purchases cash basis 2,850,000

    AP/NP end, 1,250,000

    Purchase returns -

    Payments for AP/NP -

    AP/ NP beg (900,000)

    Purchases accrual basis 3,200,000

    2.

    Rent income Cash base 615,000

    Deferred Rent Beg 50,000

    Accrued Rent end 40,000

    Deferred rent end (75,000)

    Accrue rent Beg (30,000)

    Rental income under Accrual 600,000

    600,000

    75,000

    30,000

    (50,000)

    (40,000

    615,000
    3.cash base expense 350,000

    Prepaid Beg 60,000

    Accrued End 90,000

    Prepaid End (50,000)

    Accrued Beg (75,000)

    Royalties expense (accrual) 375,000

    Cash base 350,000

    Net increase 10,000

    Payable 15,000

    Accrual ` 375,000

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