Unformatted text preview: receivable of $3,400 because it was not included in cash income but does represent accrual income for the current period. Thus, the net increase in accounts receivable of $1,100 would be added to cash income to arrive at accrual income. For liabilities, do just the opposite. Add the beginning balance and subtract the ending balance. For example, add the beginning balance in unpaid wages of $2,400 because they were paid in the current period and reduced cash earnings, but on the accrual basis they were actually an expense of the prior period. Deduct the ending balance in unpaid wages of $1,500 because they were not paid this period but were an expense of the current period. Thus, the net decrease of $900 in unpaid wages would be added to cash income to arrive at accrual income. Using the numbers in the text for E4-4, accrual basis income would b $35,980....
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This note was uploaded on 03/05/2009 for the course ECON 3A taught by Professor Loster during the Fall '07 term at UCSB.
- Fall '07