Accrual basis net income accounting help?

Problem; Rebel Technology maintains its records using cash-basis accounting. During the year, the company received cash from customers, $50,000, and paid cash for salaries, $21,900. At the beginning of the year, customers owe Rebel $1,100. By the end of the year, customers owe $8,000. At the beginning of the year, Rebel owes salaries of $7,000. At the end of the year, Rebel owes salaries of $4,000.

I searched for help, and got an explanation by this: 

Cash received from customers during the year - amount owed by customers to Rebel at the beginning of the year + amount owed by customers to Rebel at the end of the year

Cash paid as salaries during the year - amount owed by Rebel as salaries at the beginning of the year + amount owed by Rebel as salaries at the end of the year 

My question is why is it that we subtract the amount of the beginning of the year and add the amount at the end of the year? can you explain this pleaze...

2 Answers

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  • 10 months ago

    Ending AR = Beginning AR + Sales - Cash Receipts

    Transpose to solve for salesSales = Ending AR - Beginning AR + Cash receiptsEnding Salaries = Beginning salaries + Salaries - Salary PaymentsTranspose to solve for salariesSalaries = Ending Salaries - Beginning salaries + Salary Payments

  • Don G
    Lv 7
    10 months ago

    On a cash basis, Sales (income) were 50,000.

    On an accrual basis, Sales were 56,900.

    BB + Sales - Cash Receipts = EB, or.........

    1,100 + 56,900 - 50,000 = 8,000.

    How can you reconcile (or explain) Sales on a Cash basis vs an Accrual basis? On a Cash basis, sales of 50,000 include 1,100 of shipments made in the prior year but exclude 8,000 of shipments made in the current year. That's a net exclusion of 6,900, which means Sales on an accrual basis must include the 6,900.

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