Discover the five easiest steps for cash to accrual conversion! Clear your confusion fro conversion. Transtutors presents five steps to follow to convert cash accounting into accrual accounting. For accounting homework help or any type of questions on accounting, ask Transtutors' experts available 24x7 to help students. www.transtutors.com

1. A conversion from Cash basis of Accounting to Accrual Basis of
Accounting is definitely backbreaking for most of the students.
They say every problem has a solution. So, what is the solution
to this exasperating problem?
FIVE EASY STEPS FOR CASH TO ACCRUAL
CONVERSION!

2. We will start with an introduction the two terms:
Accrual basis of accounting and cash basis of
accounting.
WELL, THERE SHOULD BE SOME SOLUTION FOR
SURE.
LET US DIG IT WITH TRANSTUTORS.

3. This is the most commonly used method of accounting. Most of the entities
use this accounting practice. In this method, income is reported when earned
and expenses are reported when incurred. It is just opposite to the cash
basis system. Under the accrual basis, companies can decide when to
recognize revenue and expenses, but there are certain rules and principles
governing the recognition. In accrual basis, companies are required to make
estimation against the revenue that are recorded but may not receive.
ACCRUAL BASIS OF ACCOUNTING

4.  Accrual accounting is considered to be a standardized method of accounting;
it provides a more accurate picture of company’s current operations.
 The need of this method arises due to the complexities faced by the
company in terms of depicting true picture of the business.
 Selling items on credit provides revenue over a long period of time and thus
reporting such events on financial statements in the same reporting period is
necessary.
 Accrual basis should be used when the business is flourishing with sales of
more than $ 5 million per year or when business stocks an inventory of
items.

6. SO THAT WAS ACCRUAL ACCOUNTING.
LET’S SEE WHAT CASH BASIS OF ACCOUNTING IS.

7. This is the simplest method of maintaining books of accounts as
transactions are recorded only on the actual flow of cash in or
out of business. In cash basis, revenue is recognized only when
cash is received from the customer while expenses are recorded
when cash is paid.
CASH BASIS OF ACCOUNTING

8.  In this method of accounting, there is no match of the
revenue against expenses in an accounting period.
 This method is mostly used by sole proprietors or business
with no inventory.
 Cash basis is considered beneficial from the taxation point of
view as recording income can be put off to the next year and
expenses can be booked immediately.

9. CASH VERSUS ACCRUAL

10. Now, you must have gained some knowledge about the cash
method vs. accrual method to be able to convert cash to accrual
accounting. Cash basis provides more accurate picture of how
much cash the business has while accrual basis leaves one in a
dark as to what cash reserves are available. Cash basis depicts
misleading picture of long term profitability while accrual basis
provides true picture of profitability.

11. After this quick view at the difference between
accrual and cash basis accounting, let us now move
to the main point, i.e.
Cash to Accrual Basis Conversion

12. CASH TO ACCRUAL BASIS CONVERSION
How to convert cash
basis to accrual basis?

13. SIMPLE! JUST FOLLOW THE STEPS FOR
CONVERTING CASH BASIS TO ACCRUAL BASIS:

14. SIMPLE! JUST FOLLOW THE STEPS FOR
CONVERTING CASH BASIS TO ACCRUAL BASIS:
Add all accrued expenses for which company has
not paid cash.

15. SIMPLE! JUST FOLLOW THE STEPS FOR
CONVERTING CASH BASIS TO ACCRUAL BASIS:
Add all accrued expenses for which company has
not paid cash.
Subtract all the cash payments which pertain to
previous accounting period.

16. SIMPLE! JUST FOLLOW THE STEPS FOR
CONVERTING CASH BASIS TO ACCRUAL BASIS:
Add all accrued expenses for which company has
not paid cash.
Subtract all the cash payments which pertain to
previous accounting period.
Adding all the prepaid expenses for which cash
has been paid and which relates to next accounting
period

17. SIMPLE! JUST FOLLOW THE STEPS FOR
CONVERTING CASH BASIS TO ACCRUAL BASIS:
Add all accrued expenses for which company has
not paid cash.
Subtract all the cash payments which pertain to
previous accounting period.
Adding all the prepaid expenses for which cash
has been paid and which relates to next accounting
period
Increase in assets is added while decrease in
asset is deducted.

18. SIMPLE! JUST FOLLOW THE STEPS FOR
CONVERTING CASH BASIS TO ACCRUAL BASIS:
Add all accrued expenses for which company has
not paid cash.
Subtract all the cash payments which pertain to
previous accounting period.
Adding all the prepaid expenses for which cash
has been paid and which relates to next accounting
period
Increase in assets is added while decrease in
asset is deducted.
Increase in liability is deducted and decrease in
current liability is added.

19. SIMPLE! JUST FOLLOW THE STEPS FOR
CONVERTING CASH BASIS TO ACCRUAL BASIS:
Add all accrued expenses for which company has
not paid cash.
Subtract all the cash payments which pertain to
previous accounting period.
Adding all the prepaid expenses for which cash has
been paid and which relates to next accounting
period
Increase in assets is added while decrease in asset
is deducted.

20. FORMULA FOR CONVERSION

21. LET US APPLY THE FORMULA TO A CASH BASIS TO
ACCRUAL BASIS EXAMPLE
Accounts receivable at the beginning of the year is
$45000 and closing balance is $ 40000, Cash
collected from debtors is $150000. Calculate Sales
as per accrual basis
“Sales = Cash Collection from Debtors + Closing Balance of Receivables - Opening Balance of
Receivables”

22. LET US APPLY THE FORMULA TO A CASH BASIS TO
ACCRUAL BASIS EXAMPLE
Accounts receivable at the beginning of the year is
$45000 and closing balance is $ 40000, Cash
collected from debtors is $150000. Calculate Sales
as per accrual basis
“Sales = Cash Collection from Debtors + Closing Balance of Receivables - Opening Balance of
Receivables”

23. SO, WHAT DO YOU THINK ABOUT CASH BASIS-
ACCRUAL BASIS CONFUSION NOW?

24. IF YOU ARE STILL LOOKING FOR FURTHER
CLARIFICATION, TRY THE VIDEO BELOW BY ALLEN
MURSAU.
http://www.youtube.com/watch?v=9MkE9Dl2aiU

25. There may still arise many questions on the conversion while
working on actual problems.
But is there anything to worry about?
The best experts from the world are available 24*7 at a very
nominal price, then why should you worry about your
assignments?
Submitting your question to Transtutors gets you instant
accounting homework help.
So start practicing accrual and cash basis accounting and post
your questions at Transtutors!

26. Follow us:
Transtutors
A vision to build a worldwide youth
nation with spectrum of knowledge and
diversity of intelligence to share among
all...
www.transtutors.com