The Slater Company uses the cash basis of accounting. Slater Company collected $950,000 from its customers during 2014. Customers owed Slaughter $150,000 of accounts receivable at the beginning of 2014, and $190,000 of accounts receivable at the end of 2014. What is Slater's sales revenue for 2014 under the accrual basis of accounting?

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, revenue is recognized when it is earned (when goods or services are provided to customers) regardless of when the payment is received. To calculate sales revenue under the accrual basis, we need to add the increase in accounts receivable to the cash received from customers.

Beginning accounts receivable = $150,000 
Ending accounts receivable = $190,000 
Increase in accounts receivable = $190,000 - $150,000 = $40,000

Sales revenue under the accrual basis = cash received + increase in accounts receivable 
= $950,000 + $40,000 
= $990,000

The Slater Company Uses the Cash Basis of Accounting