November 24, 2017 at 10:11 pm #1668185msquared17Participant
I'm struggling with converting cash basis to accrual. Anyone have any tips on how to master this topic?
ThanksNovember 25, 2017 at 11:15 am #1668503Andrew808Participant
It really helps me to write down the journal entries under both basis, and compareNovember 26, 2017 at 5:21 pm #1669165melmrryParticipant
Hi there. I am using Becker and struggled with this. I found this to be very useful and succinct way of remembering the conversions:
Cash to Accrual Basis
For questions concerning NET INCOME:
Assets – Add increases; Subtract decreases
Liabilities – Add decreases; Subtract increases
For questions concerning EXPENSE OR REVENUE ACCOUNTS:
Do the opposite of the above!
For either question (net income, or regarding an expense or revenue balance) you can apply the opposite of the above to go from accrual basis to cash basis.March 22, 2020 at 4:18 pm #2967206jasongoesforCPAParticipant
Similar to Melmrry, I found something that works for me. It came to me after around 5 hours studying the material and doing questions.The great thing is if you figure it out here (Wiley has this lesson early in the content) you also master topics like Indrect Method for Statement of Cash flows.
I should admit the “understanding” this as a strategy has never worked for me – I opted for a mnemonic and formula-based approach that I can write down during the exam to help solve problems.
You only need to remember one mnemonic:
C-Alifornia Apple goes down (-) the Ladder
Interpretation: for NET INCOME AND REVENUE QUESTIONS:
Cash to Accrual (C-Alifornia), formula = add change in Assets (Apple) minus (goes down) liablities (Ladder) or —-> +Assets-Liabilites
Then you can just modify it for every other type of question:
For Accrual to Cash on the same type of question (NI and Revenue), just flip the signs (-Assets+Liabilities)
For EXPENSE QUESTIONS
Instead of switching the signs, switch the formulas between Cash to Accrual and Accrual to Cash:
Cash to Accrual: -Assets+Liabilites
Accrual to Cash: +Assets-Liabilities
This works for every problem I've tried so far, including ones where Wiley encourages T-accounts.
JasonAugust 4, 2020 at 7:37 am #3065829MangradParticipant
Jason, Appreciate it if you could share a comprehensive example where you could use you technique. Thanks so much!August 4, 2020 at 8:47 am #3065847CH89Participant
@Mangrad – I'm not sure if you will get a response, as that user was last active 4 months ago.
If you are having trouble with cash to accrual basis, have you tried using journal entries to solve these type of questions? I found writing out journal entries and filling in the missing information helped me with these type of questions.August 4, 2020 at 12:25 pm #3065982Jeff Elliott, CPAKeymaster
Bob has some cash to accrual stuff…there's an accrual accounting sim video in there too.August 6, 2020 at 3:10 pm #3068463