[lampy44]

Hey guys,

So for some reason I am getting the cash to accrual questions right about 85% of the time but every so often I am getting answers wrong when they have to do with AP or PPDs. Here is my little cheat sheet I created to understand the relationships. If there is a better way or if I have something backwards here please help me out!

CFO cash/accrual
AR – +
Unearned + –
AP + –
Inventory – +
PPD – +
Acc liab + –

Basically under CFO and cash/accrual I am showing if they have a positive relationship (add when increase) or negative relationship ( subtract when increase in account) . Since CFO and cash to accrual are opposite in nature its the best way I found to relate them. Again if I am missing something or wrong please let me know. Appreciate you all!

[Troys22]

These questions tend to trip me up from time to time as well. Cash to accrual is just confusing because who reconciles from cash to accrual anyway. However, we have all learned how to reconcile from accrual to cash because we do this when preparing a SCF. I have found that if you can master the reconciliation from accrual to cash, then all you have to do for cash to accrual is reverse the function. For example, from accrual to cash:

If AR increase, we know that we did NOT receive the cash so it is a negative and we subtract that out.
If AR decrease, we received the cash so cash is positive and we add it.

If AP increase, we know that we did NOT pay the cash so it is a positive and we add it.
If AP decrease, we paid the cash out for our payable and it is a negative CF and we subtract it.

If Prepaid increase, we are paying cash out so it is a negative CF so we subtract it.
If Prepaid decrease, it is a positive CF so we add it.

After mastering this relationship for the reconciliation of accrual to cash, simply reverse the add/subtract function to go from cash to accrual.

[Author]

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