Book Name: Principles of Managerial Finance - 180 Day Option, 14th Edition Lawrence J. Gitman P1â€“2 Accrual income...

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Finance

Book Name: Principles of Managerial Finance - 180 Day Option,14th Edition
Lawrence J. Gitman
P1â€“2 Accrual income versus cash flow for aperiodÂ Â Thomas Book Sales, Inc., suppliestextbooks to college and university bookstores. The books areshipped with a proviso that they must be paid for within 30 daysbut can be returned for a full refund credit within 90 days. In2014, Thomas shipped and billed book titles totaling $760,000.Collections, net of return credits, during the year totaled$690,000. The company spent $300,000 acquiring the books that itshipped.
Using accrual accounting and the preceding values, show thefirmâ€™s net profit for the past year.
Using cash accounting and the preceding values, show the firmâ€™snet cash flow for the past year.
Which of these statements is more useful to the financialmanager? Why? (please provide me with a detailed calculation for myreference, thank you!)

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3.9 Ratings (773 Votes)

a Under accrual basis of accounting revenues and expenses are recorded in the accounting period in which they are earned or incurred irrespective of whether such revenues have been received or expenses have been paid Accrual basis is mainly adopted for financial accounting and reporting purposes For example if we made a sale of 100 on credit basis to a person X See Answer

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