In order to compute revenue the ending accounts receivable balance must be added to the collections from customers minus the beginning balance in accounts receivable. This adjustment will convert the cash-basis information to the accrual-basis accounting.

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This is true because the accrual-basis accounting method recognizes revenue when it is earned, even if cash hasn't been received yet. Therefore, to properly calculate revenue, the ending accounts receivable balance (which represents revenue earned but not yet received in cash) must be added to the collections from customers (which represent cash received for revenue earned during the period), minus the beginning balance in accounts receivable (which represents revenue earned but not yet received in cash at the beginning of the period).

In Order to Compute Revenue the Ending Accounts Receivable Balance