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Vaughn, M.D., maintains the accounting records of Vaughn Clinic on a cash basis. During 2017,...

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Accounting

Vaughn, M.D., maintains the accounting records of Vaughn Clinic on a cash basis. During 2017, Dr. Vaughn collected $152,164 from his patients and paid $49,931 in expenses. At January 1, 2017, and December 31, 2017, he had accounts receivable, unearned service revenue, accrued expenses, and prepaid expenses as follows. (All long-lived assets are rented.)

January 1, 2017

December 31, 2017
Accounts receivable $9,374 $16,255
Unearned service revenue 2,872 4,258
Accrued expenses 3,124 1,983
Prepaid expenses 1,725 3,475

Prepare a schedule that converts Dr. Vaughns "excess of cash collected over cash disbursed" for the year 2017 to net income on an accrual basis for the year 2017.

I have the answer to this problem but am confused on some aspects of it. For example, I understand that we add the difference in accounts receivable if it goes up from 9374 to 16255, but what if it goes down? Would we then subtract it? Does this go for all the accounts? Thank you

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