In march quality pays the 18000 due the creditors

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cash from the customer. In March, Quality pays the $18,000 due the creditors. Illustration 3A-1 LO 8 Differentiate the cash basis of accounting from the accrual basis of accounting. APPENDIX 3A CASH-BASIS ACCOUNTING VERSUS ACCRUAL-BASIS ACCOUNTING
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3-57 Illustration: Quality Contractor signs an agreement to construct a garage for $22,000. In January, Quality begins construction, incurs costs of $18,000 on credit, and by the end of January delivers a finished garage to the buyer. In February, Quality collects $22,000 cash from the customer. In March, Quality pays the $18,000 due the creditors. Illustration 3A-2 LO 8 Differentiate the cash basis of accounting from the accrual basis of accounting. APPENDIX 3A CASH-BASIS ACCOUNTING VERSUS ACCRUAL-BASIS ACCOUNTING
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3-58 Conversion From Cash Basis To Accrual Basis Illustration: Dr. Diane Windsor, like many small business owners, keeps her accounting records on a cash basis. In the year 2010, Dr. Windsor received $300,000 from her patients and paid $170,000 for operating expenses, resulting in an excess of cash receipts over disbursements of $130,000 ($300,000 - $170,000). At January 1 and December 31, 2010, she has accounts receivable, unearned service revenue, accrued liabilities, and prepaid expenses as shown in Illustration 3A-5. Illustration 3A-5 LO 8 Differentiate the cash basis of accounting from the accrual basis of accounting. APPENDIX 3A CASH-BASIS ACCOUNTING VERSUS ACCRUAL-BASIS ACCOUNTING
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3-59 Illustration: Calculate service revenue on an accrual basis. Illustration 3A-5 Illustration 3A-8 LO 8 Differentiate the cash basis of accounting from the accrual basis of accounting. APPENDIX 3A CASH-BASIS ACCOUNTING VERSUS ACCRUAL-BASIS ACCOUNTING Conversion From Cash Basis To Accrual Basis
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3-60 Illustration: Calculate operating expenses on an accrual basis. Illustration 3A-5 Illustration 3A-11 LO 8 Differentiate the cash basis of accounting from the accrual basis of accounting. APPENDIX 3A CASH-BASIS ACCOUNTING VERSUS ACCRUAL-BASIS ACCOUNTING Conversion From Cash Basis To Accrual Basis
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3-61 LO 8 Illustration 3A-12 APPENDIX 3A CASH-BASIS ACCOUNTING VERSUS ACCRUAL-BASIS ACCOUNTING Conversion From Cash Basis To Accrual Basis
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3-62 LO 8 Differentiate the cash basis of accounting from the accrual basis of accounting. Theoretical Weaknesses of the Cash Basis Today’s economy is considerably more lubricated by credit than by cash. The accrual basis, not the cash basis, recognizes all aspects of the credit phenomenon. Investors, creditors, and other decision makers seek timely information about an enterprise’s future cash flows. APPENDIX 3A CASH-BASIS ACCOUNTING VERSUS ACCRUAL-BASIS ACCOUNTING
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  • Spring '08
  • JCEasterwood
  • Income Statement, Generally Accepted Accounting Principles, Double-entry bookkeeping system, Pioneer

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