Converting Cash to Accrual Accounting. CPA EXAM questions/Simulations.  INtermediate Accounting
Channel: Farhat Lectures. The # 1 CPA & Accounting Courses
Date: 2020-08-27

In this video, I cover Converting Cash to Accrual.  Converting cash to accrual Accounting is a topic that is covered on the CPA exam. 
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The difference between cash and accrual accounting lies in the timing of when sales and purchases are recorded in your accounts. Cash accounting recognizes revenue and expenses only when money changes hands, but accrual accounting recognizes revenue when it's earned, and expenses when they're billed (but not paid).

Before year 2, Droit Co. used the cash basis of accounting. As of December 31, year 2, Droit changed to the accrual basis. Droit cannot determine the beginning balance of supplies inventory. What is the effect of Droit’s inability to determine beginning supplies inventory on its year 2 accrual-basis net income and December 31, year 2 accrual-basis owners’ equity?