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The document compares cash basis and accrual basis accounting. It provides example income statements for a company for the year ended December 31, 2020 under both the cash basis and accrual basis methods. The accrual basis statements account for accounts receivable, inventory, accounts payable, accrued income, unearned income, prepaid expenses, and accrued expenses. The cash basis statements do not make these adjustments and instead record revenue and expenses when cash is received or paid.

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Io Aya
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Download as PDF, TXT or read online on Scribd
72 views44 pages

File PDF

The document compares cash basis and accrual basis accounting. It provides example income statements for a company for the year ended December 31, 2020 under both the cash basis and accrual basis methods. The accrual basis statements account for accounts receivable, inventory, accounts payable, accrued income, unearned income, prepaid expenses, and accrued expenses. The cash basis statements do not make these adjustments and instead record revenue and expenses when cash is received or paid.

Uploaded by

Io Aya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Cash Basis

Versus
Accrual Basis
Expected Questions Tracker

Cash Accrual
Basis Basis

 Sales
 Cost of goods sold
 Other income
 Operating expense
 Net income
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Accounts Receivable
Accrual Basis
Beginning XX
Net sales XX XX
Sales XX Collection
Cost of Goods Sold (XX)
Recovery XX XX Collect. WO
Gross Profit XX
XX Write off
Other Income XX
Operating Expense (XX) XX Return
XX Discount
Profit Before Tax XX

Ending XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Inventory, Beg XX
Accrual Basis Purchases XX

Net sales XX Inventory, End (XX)


Cost of Goods Sold (XX) Cost of goods sold XX
Gross Profit XX
Other Income XX
Operating Expense (XX) Accounts Payable

Profit Before Tax XX XX AP, Beg


Payment XX
XX Purchases
Return XX
Discount XX

XX AP, End
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Accrued Income
Accrual Basis
Beginning XX
Net sales XX
Cost of Goods Sold (XX)
Other income XX XX Collection
Gross Profit XX
Other Income XX
Ending XX
Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Unearned Income
Accrual Basis
XX Beginning
Net sales XX
Cost of Goods Sold (XX)
Other income XX XX Collection
Gross Profit XX
Other Income XX XX Ending
Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Prepaid Expense
Accrual Basis
Beginning XX
Net sales XX
Cost of Goods Sold (XX) Expense
Payment XX XX
Gross Profit XX incurred

Other Income XX
Ending XX
Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Accrued Expense
Accrual Basis
XX Beginning
Net sales XX
Cost of Goods Sold (XX) Expense
Payment XX XX
Gross Profit XX Incurred

Other Income XX XX Ending


Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Accounts Receivable
Cash Basis
Beginning XX
Net sales XX XX
Sales XX Collection
Cost of Goods Sold (XX)
Recovery XX XX Collect. WO
Gross Profit XX
XX Write off
Other Income XX
Operating Expense (XX) XX Return
XX Discount
Profit Before Tax XX

Ending XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Inventory, Beg XX
Cash Basis Purchases XX

Net sales XX Inventory, End (XX)


Cost of Goods Sold (XX) Cost of goods sold XX
Gross Profit XX
Other Income XX
Operating Expense (XX) Accounts Payable

Profit Before Tax XX XX AP, Beg


Payment XX
XX Purchases
Return XX
Discount XX

XX AP, End
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Accrued Income
Cash Basis
Beginning XX
Net sales XX
Cost of Goods Sold (XX)
Other income XX XX Collection
Gross Profit XX
Other Income XX
Ending XX
Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Unearned Income
Cash Basis
XX Beginning
Net sales XX
Cost of Goods Sold (XX)
Other income XX XX Collection
Gross Profit XX
Other Income XX XX Ending
Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Prepaid Expense
Cash Basis
Beginning XX
Net sales XX
Cost of Goods Sold (XX) Expense
Payment XX XX
Gross Profit XX Incurred

Other Income XX
Ending XX
Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Accrued Expense
Cash Basis
XX Beginning
Net sales XX
Cost of Goods Sold (XX) Expense
Payment XX XX
Gross Profit XX Incurred

Other Income XX XX Ending


Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Accounts Receivable
Accrual Basis
Beginning
Beginning 900,000
XX
Net sales XX
9,400,000 Sales 9,400,000
XX 9,500,000 Collection
Sales XX Collection
Cost of Goods Sold (XX)
(XX)
Gross Profit XX
XX
Other Income XX
XX
Operating Expense (XX)
(XX)
Profit Before Tax XX
XX
Ending
Ending 800,000
XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Inventory, Beg 250,000
XX
Accrual Basis Purchases 3,950,000
XX

Net sales XX
9,400,000 Inventory, End (300,000)
(XX)
Cost of Goods Sold (XX)
(3,900,000) Cost of goods sold 3,900,000
XX
Gross Profit XX
5,500,000
Other Income XX
XX
Operating Expense (XX)
(XX) Accounts Payable

Profit Before Tax XX


XX 650,000
XX AP, Beg
Payment 4,100,000
XX
3,950,000
XX Purchases
Return XX
Discount XX

500,000
XX AP, End
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Prepaid Expense
Accrual Basis
Beginning XX
600,000
Net sales XX
9,400,000
Cost of Goods Sold (XX)
(3,900,000) Expense
Payment XX
1,400,000 XX
1,600,000
Gross Profit XX
5,500,000 incurred

Other Income 300,000


XX
Ending XX
400,000
Operating Expense (1,600,000)
(XX)
Profit Before Tax
Depreciation (900,000)
XX
Net income 3,300,000
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Accounts Receivable
Cash Basis
Beginning
Beginning 900,000
XX
Net sales XX
9,500,000 Sales 9,400,000
XX 9,500,000 Collection
Sales XX Collection
Cost of Goods Sold (XX)
(XX)
Gross Profit XX
XX
Other Income XX
XX
Operating Expense (XX)
(XX)
Profit Before Tax XX
XX
Ending
Ending 800,000
XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Inventory, Beg 250,000
XX
Cash Basis Purchases 4,100,000
XX

Net sales 9,500,000


XX Inventory, End (300,000)
(XX)
Cost of Goods Sold (4,050,000)
(XX) Cost of goods sold 4,050,000
XX
Gross Profit 5,450,000
XX
Other Income XX
XX
Operating Expense (XX)
(XX) Accounts Payable

Profit Before Tax XX


XX 650,000
XX AP, Beg
Payment 4,100,000
XX
3,950,000
XX Purchases
Return XX
Discount XX

500,000
XX AP, End
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Prepaid Expense
Cash Basis
Beginning XX
600,000
Net sales XX
9,500,000
Cost of Goods Sold (XX)
(4,050,000) Expense
Payment XX
1,400,000 XX
1,600,000
Gross Profit XX
5,450,000 incurred

Other Income 300,000


XX
Ending XX
400,000
Operating Expense (1,400,000)
(XX)
Profit Before Tax
Depreciation (900,000)
XX
Net income 3,450,000
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Prepaid Expense
Accrual Basis
Beginning 2,400
Net sales XX
Cost of Goods Sold (XX) Expense
Payment 25,450 26,150
Gross Profit XX incurred

Other Income XX
Ending 1,700
Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Accrued Income
Accrual Basis
Beginning 4,700
Net sales XX
Cost of Goods Sold (XX)
Other income 52,250 53,750 Collection
Gross Profit XX
Other Income XX
Ending 3,200
Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Accrued Expense
Accrual Basis
12,300 Beginning
Net sales XX
Cost of Goods Sold (XX) Expense
Payment 116,300 114,600
Gross Profit XX Incurred

Other Income XX 10,600XX Ending


Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Accrued Income
Accrual Basis
Beginning 9,100
Net sales XX
Cost of Goods Sold (XX)
Other income 75,500 77,100 Collection
Gross Profit XX
Other Income XX
Ending 7,500
Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Accrued Expense
Accrual Basis
8,900 Beginning
Net sales XX
Cost of Goods Sold (XX) Expense
Payment 69,700 65,000
Gross Profit XX Incurred

Other Income XX 4,200 Ending


Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Statement of Comprehensive Income
For Year Ended December 31, 2020 Prepaid Expense
Cash Basis
Beginning 1,100
XX
Net sales XX
Cost of Goods Sold (XX) Expense
Payment 10,000
XX 9,600
XX
Gross Profit XX incurred

Other Income XX
Ending 1,500
XX
Operating Expense (XX)
Profit Before Tax XX
Cash Basis VS. Accrual Basis
Beginning Beginning
Of Accrued Of Unearned
Income Accrued Income Income
Unearned Income

Beginning XX XX Beginning

OFFSET
ENDING!!! Other income XX XX Collection

Ending XX XX Ending

Accrued Income XX Accrued Income XX


Unearned Income XX Unearned Income XX
Accrued Income XX Unearned Income XX
Cash Basis VS. Accrual Basis
Beginning Beginning
Of Accrued Of Unearned
Income Accrued Income Income
Unearned Income

Beginning 3,000 5,000 Beginning

OFFSET
ENDING!!! Other income 60,000 61,500 Collection

Ending 3,500 Ending

Accrued Income XX Accrued Income 4,000


Unearned Income XX Unearned Income 7,500
Accrued Income XX Unearned Income 3,500
Cash Basis VS. Accrual Basis
Beginning Beginning
Of Accrued Of Unearned
Income Accrued Income Income
Unearned Income

Beginning 1,600,000 1,200,000 Beginning

OFFSET
ENDING!!! Other income 2,400,000 4,000,000 Collection

Ending 1,200,000 Ending

Accrued Income XX Accrued Income 800,000


Unearned Income XX Unearned Income 2,000,000
Accrued Income XX Unearned Income 1,200,000
Cash Basis VS. Accrual Basis
Beginning Beginning
Of Prepaid Of Accrued
Expense Prepaid Expense Expense
Accrued Expense

Beginning XX XX Beginning

OFFSET Expense
Payment XX XX
ENDING!!! Incurred

Ending XX XX Ending

Prepaid Expense XX Prepaid Expense XX


Accrued Expense XX Accrued Expense XX
Prepaid Expense XX Accrued Expense XX
Cash Basis VS. Accrual Basis
Beginning Beginning
Of Prepaid Of Accrued
Expense Prepaid Expense Expense
Accrued Expense

Beginning 500,000 2,000,000 Beginning

OFFSET
ENDING!!! Payment 5,000,000 4,500,000 Expense
Incurred

Ending 1,000,000 Ending

Prepaid Expense XX Prepaid Expense 1,500,000


Accrued Expense XX Accrued Expense 2,500,000
Prepaid Expense XX Accrued Expense 1,000,000
Cash Basis VS. Accrual Basis
Beginning Beginning
Of Prepaid Of Accrued
Expense Prepaid Expense Expense
Accrued Expense

Beginning 60,000 210,000 Beginning

OFFSET Expense
ENDING!!! Payment 249,000 249,000 Incurred

Ending XX 186,000 Ending

Prepaid Expense XX Prepaid Expense 69,000


Accrued Expense XX Accrued Expense 255,000
Prepaid Expense XX Accrued Expense 186,000

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