[Anonymous]

I am using Becker to study for my FAR exam in mid July.

I am having trouble getting down the concepts and rules for the effects of changing from Accrual-basis to cash-basis and vice versa…. The book and lectures don’t do a great job of explaining the different effects and which accounts to increase and decrease.

Any advice or how I can understand this better?

[y_u_no_pass]

I will say both some problems and SIMS on this seem to go too far and get too technical. I assume you are comfortable with accrual basis. So cash basis just charges revenues and expenses when the cash is received or paid. Also there is no bad debt expense because there is no accrual of revenue before receipt of cash. I tend to do these problems in a matter where I calculate it as if cash basis and as if accrual basis. Then I can figure out the answer to the question. If I try to just add or subtract one value I often mess it up.

Florida CPA!
Took final exam 2/25/15.
Sent in Application 3/12/15.
Issued License 3/20/15.
Used CPA Excel solely for all exams.

[Anonymous]

It really just depends on your preference for working through the problem. I can honestly say that what helped it click for me was looking at it from a journal entry perspective. I think it was this response from the user RandomAlt that guided me in the right direction: https://www.another71.com/cpa-exam-forum/topic/cash-to-accrual-basis.

If you are comfortable with the natural balances in accounts and how balances are impacted by increase/decreases then I would recommend working through a couple of problems this way. The other key is paying attention to whether it is asking from cash –> accrual or accrual –> cash. For example, someone might read the problem in the link above and try to plug for cash when it in fact is asking for a revenue plug.

If you are having any issues with working through a problem in this format post it here and we'll see if we can walk through it. Hopefully this helps, good luck!

[Anonymous]

Thank you everyone… Started using T-accounts and is making more sense

[Anonymous]

Hey – I'm also studying for FAR with Becker and was having trouble with cash-accrual and vice versa. Becker had a great explanation that made a lot of sense on one of the MCQs:

Cash basis to accrual basis:

1. add increases in current assets

2. subtract decreases in current assets

3. add decreases in current liabilities

4. subtract increases in current liabilities

Then, going from accrual to cash would just be the opposites of the above rules. Hope this helps!

[Author]

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