FAR – Cash to accrual basis

Viewing 4 posts - 1 through 4 (of 4 total)
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  • #1668185
    msquared17
    Participant

    I'm struggling with converting cash basis to accrual. Anyone have any tips on how to master this topic?

    Thanks

    #1668503
    Andrew808
    Participant

    It really helps me to write down the journal entries under both basis, and compare

    AUD - 76
    BEC - 75
    FAR - 80
    REG - 77
    scoring > 75 means I studied too hard, right?
    #1669165
    melmrry
    Participant

    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.

    #2967206
    jasongoesforCPA
    Participant

    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.

    Jason

    FAR: Studying

    REG: Passed

    AUD: Passed

    BEC: Passed

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