Look at the effects on accrual income and cash basis income in the period revenue is accrued and in the next period when you collect cash. Also, look at the effects on accrual income and cash basis income in the period interest expense is accrued and in the next period when you pay cash.

Imagine for a moment that the balance in Accounts Receivable increases during a period (i.e., the ending balance in the account is greater than the beginning balance). Would the effect of these transactions produce more accrual income or cash basis income? What if the balance in A/R decreases?

Now imagine that the balance in Interest Payable increases during a period. Would the effect of these transactions produce more accrual income or cash basis income? What if the balance in Interest Payable decreases?

Answer rating: 100% (QA)

Lets break down the effects of accrual accounting and cash basis accounting on income in different scenarios 1 Revenue Accrual and Cash Collection Acc... View the full answer