Abstract:
A method of automatically converting from accrual based accounting to cash basis accounting using a computer is disclosed. The method may include reviewing an entry in a general ledger, determining whether an entry in the general ledger is for a transaction between general ledger accounts that are treated differently in accrual based accounting and cash based accounting, for an entry determined to be between general ledger accounts that are treated differently in accrual based accounting and cash based accounting, calculating a modifying entry to convert the entry from accrual basis accounting to cash basis accounting, applying the calculated modification entry to the entry, and creating a modified balance sheet and modified income statement based on the modified entry.

Description:
BACKGROUND  
       [0001]     Accounting is the system to track and review the financial performance of a business or entity. Double entry accounting provides that every entry into the accounting system requires two entries in different accounts that offset each other, thereby keeping the books in balance. One basis for accounting is a cash basis and a second basis is an accrual basis. Using a cash basis, finds are recognized when the funds are actually received and expenses are recognized when payments are actually made. Using an accrual basis, finds are recognized once an item or service is sold, creating a receivable that will be received in the future and expenses are recognized when they are incurred, creating a payable that will be paid at a point in the future. Modern tax code allows certain businesses to use cash basis accounting and other businesses to use accrual based accounting. The use of either accrual or cash basis accounting can have desirable or undesirable tax consequences as the reportable income can change depending on the basis selected. In addition, certain creditors may desire to see financial statements using cash basis accounting and other creditors may desire to see financial performance using accrual based accounting. However, accurately switching the basis of accounting and determining the effects of switching the basis of accounting for a given company has been a challenging task, but a task that has a potential payoff in lower reportable income and lower taxes to be paid.  
       SUMMARY  
       [0002]     A method of automatically converting from accrual based accounting to cash basis accounting using a computer is disclosed. The method may include reviewing an entry in a general ledger, determining whether an entry in the general ledger is for a transaction between general ledger accounts that are treated differently in accrual based accounting and cash based accounting, for an entry determined to be between general ledger accounts that are treated differently in accrual based accounting and cash based accounting, calculating a modifying entry to convert the entry from accrual basis accounting to cash basis accounting, applying the calculated modification entry to the entry, and creating a modified balance sheet and modified income statement based on the modified entry.  
         [0003]     Additionally, the method may include creating a table of the entries that were modified. The method may also include placing in a phantom income account payments from customers that have not yet been applied to an invoice such that the payments are included in the modified balance sheet and modified income statement, placing in a phantom expense account payments to vendors that have not yet been applied to a bill such that the expenses are included in the modified balance sheet and modified income statement, displaying in the sales tax payable account the opening balance, sales tax paid on paid or partially paid invoices and payments to tax vendors so long as the amounts had at least one posting to a cash or bank account, allowing a user to select, using a drop down selection box, to view financial statements as one of cash basis statements and accrual basis statements, allowing a user to select, using a drop down selection box, to view financial statements as one of cash basis statements and accrual basis statements and allowing the user to switch between the cash basis statements and the accrual basis statements, allowing a user to create a statement that highlights the differences between cash basis accounting and accrual based accounting for a particular entity, and allowing a user to view financial statements as one of cash basis statements and accrual basis statements and allowing the user to switch between the cash basis statements and the accrual basis statements by storing the calculated changes in a temporary location without modifying the underlying entries.  
         [0004]     Also disclosed is a memory having a computer program stored therein, said computer program being capable of being used in connection with a computing apparatus where the memory may have a memory portion physically configured in accordance with computer program instructions that would cause the computing apparatus to review postings in a general ledger, determining whether the entry in the general ledge is for a transaction between general ledger accounts that are treated differently in accrual based accounting and cash basis accounting, for entries determined to be between general ledger accounts that are treated differently in accrual based accounting and cash basis accounting, determining a modifying entry to the entry to convert the entry from accrual basis accounting to cash basis accounting, modifying the amount of the entries based on the determined modified entry and create a modified balance sheet and modified income statement based on the reversed payable and accrual entries. The modifying entry may be based on the percentage of a payment that has been received or based on the percentage of a payment that has been made.  
         [0005]     The computer program instructions may also cause the computing apparatus to create a table of the entries that were modified, place in a phantom income account payments from customers that have not yet been applied to an invoice such that the payments are included in the modified balance sheet and modified income statement, place in a phantom expense account payments to vendors that have not yet been applied to a bill such that the expenses are included in the modified balance sheet and modified income statement, display in the sales tax payable account the opening balance, sales tax paid on paid or partially paid invoices and payments to tax vendors so long as the amounts had at least one posting to a cash or bank account, to allow a user to select, using a drop down selection box, to view financial statements as one of cash basis statements and accrual basis statements, allow a user to select, using a drop down selection box, to view financial statements as one of cash basis statements and accrual basis statements and allowing the user to switch between the cash basis statements and the accrual basis statements, allow a user to create a statement that highlights the differences between cash basis accounting and accrual based accounting for a particular entity, and allow a user to view financial statements as one of cash basis statements and accrual basis statements and allowing the user to switch between the cash basis statements and the accrual basis statements by storing the calculated changes in a temporary location without modifying the underlying entries.  
         [0006]     Additionally disclosed is a computing apparatus, that may include a display unit that is capable of generating video images, an input device, a processing apparatus operatively coupled to said display unit and said input device, said processing apparatus may include a processor and a memory operatively coupled to said processor, a network interface connected to a network and to the processing apparatus. The processing apparatus may be programmed to review postings in a general ledger, determining whether the entry in the general ledge is for a transaction between general ledger accounts that are treated differently in accrual based accounting and cash basis accounting, for entries determined to be between general ledger accounts that are treated differently in accrual based accounting and cash basis accounting, determining a modifying entry to the entry to convert the entry from accrual basis accounting to cash basis accounting, modifying the amount of the entries based on the determined modified entry and create a modified balance sheet and modified income statement based on the reversed payable and accrual entries. The modifying entry may be based on the percentage of a payment that has been received or based on the percentage of a payment that has been made.  
         [0007]     The processing apparatus may also be programmed to creating a table of the entries that were modified, place in a phantom income account payments from customers that have not yet been applied to an invoice such that the payments are included in the modified balance sheet and modified income statement, place in a phantom expense account payments to vendors that have not yet been applied to a bill such that the expenses are included in the modified balance sheet and modified income statement, display in the sales tax payable account the opening balance, sales tax paid on paid or partially paid invoices and payments to tax vendors so long as the amounts had at least one posting to a cash or bank account, allow a user to select, using a drop down selection box, to view financial statements as one of cash basis statements and accrual basis statements, allow a user to select, using a drop down selection box, to view financial statements as one of cash basis statements and accrual basis statements and allowing the user to switch between the cash basis statements and the accrual basis statements, allow a user to create a statement that highlights the differences between cash basis accounting and accrual based accounting for a particular entity and view financial statements as one of cash basis statements and accrual basis statements and allowing the user to switch between the cash basis statements and the accrual basis statements by storing the calculated changes in a temporary location without modifying the underlying entries. 
     
    
     BRIEF DESCRIPTION OF THE DRAWINGS  
       [0008]      FIG. 1  is a block diagram of an embodiment of a computing apparatus system in accordance with the claims;  
         [0009]      FIG. 2  is a block diagram of a method in accordance with the claims;  
         [0010]      FIG. 3  is an illustration of a table of transactions between accounts that will be reviewed in accordance with the claims;  
         [0011]      FIGS. 4   a  and  4   b  are illustration of a general ledger in accordance with the claims;  
         [0012]      FIG. 5  is an illustration of profit and loss statement in accordance with the claims;  
         [0013]      FIG. 6  is an illustration of a balance sheet in accordance with the claims;  
         [0014]      FIG. 7  is an illustration of a sales by item listing in accordance with the claims;  
         [0015]      FIG. 8  is an illustration of a sales by customer listing in accordance with the claims;  
         [0016]      FIG. 9  is an illustration of a phantom income listing in accordance with the claims;  
         [0017]      FIG. 10  is an illustration of a balance sheet comparing cash basis versus accrual basis accounting for a given company in accordance with the claims;  
         [0018]      FIG. 11  is an illustration of a balance sheet comparing cash basis versus accrual basis accounting for a given company in accordance with the claims; and  
         [0019]      FIG. 12  is an illustration of a income statement comparing cash basis versus accrual basis accounting for a given company in accordance with the claims. 
     
    
     DESCRIPTION  
       [0020]     Although the following text sets forth a detailed description of numerous different embodiments, it should be understood that the legal scope of the description is defined by the words of the claims set forth at the end of this patent. The detailed description is to be construed as exemplary only and does not describe every possible embodiment since describing every possible embodiment would be impractical, if not impossible. Numerous alternative embodiments could be implemented, using either current technology or technology developed after the filing date of this patent, which would still fall within the scope of the claims defining the invention.  
         [0021]     It should also be understood that, unless a term is expressly defined in this patent using the sentence “As used herein, the term ‘______’ is hereby defined to mean . . . ” or a similar sentence, there is no intent to limit the meaning of that term, either expressly or by implication, beyond its plain or ordinary meaning, and such term should not be interpreted to be limited in scope based on any statement made in any section of this patent (other than the language of the claims). To the extent that any term recited in the claims at the end of this patent is referred to in this patent in a manner consistent with a single meaning, that is done for sake of clarity only so as to not confuse the reader, and it is not intended that such claim term by limited, by implication or otherwise, to that single meaning. Finally, unless a claim element is defined by reciting the word “means” and a function without the recital of any structure, it is not intended that the scope of any claim element be interpreted based on the application of 35 U.S.C. § 112, sixth paragraph.  
         [0022]      FIG. 1  illustrates an example of a suitable computing system environment  100  on which the claimed method and programmed memory and apparatus may be implemented. The computing system environment  100  is only one example of a suitable computing environment and is not intended to suggest any limitation as to the scope of use or functionality of the invention. Neither should the computing environment  100  be interpreted as having any dependency or requirement relating to any one or combination of components illustrated in the exemplary operating environment  100 .  
         [0023]     The claimed methods, programmed memory and apparatus are operational with numerous other general purpose or special purpose computing system environments or configurations. Examples of well known computing systems, environments, and/or configurations that may be suitable for use with the invention include, but are not limited to, personal computers, server computers, hand-held or laptop devices, multiprocessor systems, microprocessor-based systems, set top boxes, programmable consumer electronics, network PCs, minicomputers, mainframe computers, distributed computing environments that include any of the above systems or devices, and the like.  
         [0024]     The claimed methods, apparatus and programmed memory may be described in the general context of computer-executable instructions, such as program modules, being executed by a computer. Generally, program modules include routines, programs, objects, components, data structures, etc. that perform particular tasks or implement particular abstract data types. The invention may also be practiced in distributed computing environments where tasks are performed by remote processing devices that are linked through a communications network. In a distributed computing environment, program modules may be located in both local and remote computer storage media including memory storage devices.  
         [0025]     With reference to  FIG. 1 , an exemplary system for implementing the claimed methods, apparatus and programmed memory includes a general purpose computing device in the form of a computer  110 . Components of computer  110  may include, but are not limited to, a processing unit  120 , a system memory  130 , and a system bus  121  that couples various system components including the system memory to the processing unit  120 . The system bus  121  may be any of several types of bus structures including a memory bus or memory controller, a peripheral bus, and a local bus using any of a variety of bus architectures. By way of example, and not limitation, such architectures include Industry Standard Architecture (ISA) bus, Micro Channel Architecture (MCA) bus, Enhanced ISA (EISA) bus, Video Electronics Standards Association (VESA) local bus, and Peripheral Component Interconnect (PCI) bus also known as Mezzanine bus.  
         [0026]     Computer  110  typically includes a variety of computer readable media. Computer readable media can be any available media that can be accessed by computer  110  and includes both volatile and nonvolatile media, removable and non-removable media. By way of example, and not limitation, computer readable media may comprise computer storage media and communication media. Computer storage media includes both volatile and nonvolatile, removable and non-removable media implemented in any method or technology for storage of information such as computer readable instructions, data structures, program modules or other data. Computer storage media includes, but is not limited to, RAM, ROM, EEPROM, flash memory or other memory technology, CD-ROM, digital versatile disks (DVD) or other optical disk storage, magnetic cassettes, magnetic tape, magnetic disk storage or other magnetic storage devices, or any other medium which can be used to store the desired information and which can accessed by computer  110 . Communication media typically embodies computer readable instructions, data structures, program modules or other data in a modulated data signal such as a carrier wave or other transport mechanism and includes any information delivery media. The term “modulated data signal” means a signal that has one or more of its characteristics set or changed in such a manner as to encode information in the signal. By way of example, and not limitation, communication media includes wired media such as a wired network or direct-wired connection, and wireless media such as acoustic, RF, infrared and other wireless media. Combinations of the any of the above should also be included within the scope of computer readable media.  
         [0027]     The system memory  130  includes computer storage media in the form of volatile and/or nonvolatile memory such as read only memory (ROM)  131  and random access memory (RAM)  132 . A basic input/output system  133  (BIOS), containing the basic routines that help to transfer information between elements within computer  110 , such as during start-up, is typically stored in ROM  131 . RAM  132  typically contains data and/or program modules that are immediately accessible to and/or presently being operated on by processing unit  120 . By way of example, and not limitation,  FIG. 1  illustrates operating system  134 , application programs  135 , other program modules  136 , and program data  137 .  
         [0028]     The computer  110  may also include other removable/non-removable, volatile/nonvolatile computer storage media. By way of example only,  FIG. 1  illustrates a hard disk drive  140  that reads from or writes to non-removable, nonvolatile magnetic media, a magnetic disk drive  151  that reads from or writes to a removable, nonvolatile magnetic disk  152 , and an optical disk drive  155  that reads from or writes to a removable, nonvolatile optical disk  156  such as a CD ROM or other optical media. Other removable/non-removable, volatile/nonvolatile computer storage media that can be used in the exemplary operating environment include, but are not limited to, magnetic tape cassettes, flash memory cards, digital versatile disks, digital video tape, solid state RAM, solid state ROM, and the like. The hard disk drive  141  is typically connected to the system bus  121  through a non-removable memory interface such as interface  140 , and magnetic disk drive  151  and optical disk drive  155  are typically connected to the system bus  121  by a removable memory interface, such as interface  150 .  
         [0029]     The drives and their associated computer storage media discussed above and illustrated in  FIG. 1 , provide storage of computer readable instructions, data structures, program modules and other data for the computer  110 . In  FIG. 1 , for example, hard disk drive  141  is illustrated as storing operating system  144 , application programs  145 , other program modules  146 , and program data  147 . Note that these components can either be the same as or different from operating system  134 , application programs  135 , other program modules  136 , and program data  137 . Operating system  144 , application programs  145 , other program modules  146 , and program data  147  are given different numbers here to illustrate that, at a minimum, they are different copies. A user may enter commands and information into the computer  20  through input devices such as a keyboard  162  and pointing device  161 , commonly referred to as a mouse, trackball or touch pad. Other input devices (not shown) may include a microphone, joystick, game pad, satellite dish, scanner, or the like. These and other input devices are often connected to the processing unit  120  through a user input interface  160  that is coupled to the system bus, but may be connected by other interface and bus structures, such as a parallel port, game port or a universal serial bus (USB). A monitor  191  or other type of display device is also connected to the system bus  121  via an interface, such as a video interface  190 . In addition to the monitor, computers may also include other peripheral output devices such as speakers  197  and printer  196 , which may be connected through an output peripheral interface  190 .  
         [0030]     The computer  110  may operate in a networked environment using logical connections to one or more remote computers, such as a remote computer  180 . The remote computer  180  may be a personal computer, a server, a router, a network PC, a peer device or other common network node, and typically includes many or all of the elements described above relative to the computer  110 , although only a memory storage device  181  has been illustrated in  FIG. 1 . The logical connections depicted in  FIG. 1  include a local area network (LAN)  171  and a wide area network (WAN)  173 , but may also include other networks. Such networking environments are commonplace in offices, enterprise-wide computer networks, intranets and the Internet.  
         [0031]     When used in a LAN networking environment, the computer  110  is connected to the LAN  171  through a network interface or adapter  170 . When used in a WAN networking environment, the computer  110  typically includes a modem  172  or other means for establishing communications over the WAN  173 , such as the Internet. The modem  172 , which may be internal or external, may be connected to the system bus  121  via the user input interface  160 , or other appropriate mechanism. In a networked environment, program modules depicted relative to the computer  110 , or portions thereof, may be stored in the remote memory storage device. By way of example, and not limitation,  FIG. 1  illustrates remote application programs  185  as residing on memory device  181 . It will be appreciated that the network connections shown are exemplary and other means of establishing a communications link between the computers may be used.  
       ACCOUNTING SYSTEMS AND METHODS  
       [0032]      FIG. 2  illustrates a method of automatically switching from an accrual basis to a cash flow basis for accounting. At block  200 , an entry in the general ledger is reviewed. For example,  FIGS. 4A and 4B  are illustrations of a general ledger. A general ledger has a series of accounts, for example, in  FIG. 4A , account  310  is a savings account, numeral  320  represents general checking related general ledger entries, numeral  330  represents money market funds, etc. Each transactional entry should have an equal debit and credit entry.  
         [0033]     At block  210 , the method may determine whether the entry in the general ledger is for a transaction between general ledger accounts that are treated differently in accrual basis accounting and cash basis accounting. For example, in  FIG. 4A , under heading  1060  Money Market Funds, identification number  330 , customer payment identification number  340  in the amount of $1,188.00 normally would be an accrual but is offset in cash basis accounting  350 . Accordingly, this entry is identified as an entry for transaction that involves an accrual.  
         [0034]      3  illustrates a grid that indicates which general ledger account type postings may be reviewed. Column  270  lists account types, row  272  list offseting account types and the intersection of the types indicates which posting between the accounts are to be reviewed. For example, if there is a posting between the credit card account  274  and the bank account  276 , then the “y” in the block  278  where the credit card account  274  and bank account  276  intersect indicates that postings between these accounts are to be reviewed. Continuing to review the credit card account  274 , at the intersection of the credit card row  274  and the inventory asset column  280 , lack of a “y” and/or the presence of a grey block at intersection  282  may indicate that postings between these accounts will not be reviewed because transactions between these accounts would not be changed when switching from an accrual basis to a cash flow basis. In general, the following lists some examples of the different treatment of accounts in cash basis systems and in accrual basis systems:  
         [0035]     Accounts Payable. Cash Basis: Unpaid bills are not part of the accounting system. Accrual Basis: Unpaid bills are expensed, whether or not the purchaser has physically paid for the goods in question.  
         [0036]     Depreciation. Cash Basis: When fixtures or equipment are purchased, the purchaser pays cash and the item is expensed immediately. Accrual Basis: Purchases of major assets are expensed over their useful lives, perhaps on a three- or five-year schedule.  
         [0037]     Inventory. Cash Basis: When inventory is purchased, it is booked as expense. Accrual Basis: Inventory is booked as an asset and inventory is only charged as an expense when the inventory items are actually used.  
         [0038]     Prepaid Expense. Cash Basis: Bills paid in advance are treated as a simple expense. Accrual Basis: Advance payments are “held” as liabilities on the balance sheet and when the goods or services are received, the “real” expense is recorded.  
         [0039]     Prepaid Revenue. Cash Basis: If a customer pays in advance or furnishes a deposit, it is simply treated as a current receipt. Accrual Basis: Advance payments are treated as prepaid revenue and they are recorded as “real” revenue when the goods or services are actually furnished to the customer.  
         [0040]     Receivables. Under the cash basis, income is recognized when it is received. Under the accrual basis, income is recognized when it&#39;s earned, whether the cash is received or not.  
         [0041]     Work in Progress. Cash Basis: The value of work in progress is ignored. Accrual Basis: Work in progress is recorded as an asset at the end of accounting periods.  
         [0042]     It should be noted that the current system works at an even lower level by examining the specific postings between accounts and not just looking at broad totals in accounts. If at block  210  that the entry does not involving entries that need to be modified, the method may continue to block  240  and the balance sheet and income statement may not differ between the accrual and cash basis accounting basis.  
         [0043]     If block  210  determines that the entry involves a transaction between accounts that are treated differently in cash basis accounting and accrual basis accounting then, at block  220 , a modifying entry to convert the entry to cash basis is determine. For example, looking at  FIG. 4A , the customer payment that has not been received for $1,188.00 (identified by number  350 ) then is modified based on the amount that has not yet been received, which in this case $0.00 has been received, so the entire entry is reversed. If 20% of the payment had been received, then 20% of the entry would be reversed. As another example, referring to the note payable to the Bank of Microsoft, number  360 , as this entire amount of $815.87 has not been paid, the entire amount is reversed. If 20% of the payable had been paid, then 20% of the entry would have been reversed. Control may then pass to block  230 .  
         [0044]     At block  230 , the original accrual entry is modified such that it will now be proper under cash basis accounting. The modification can be a separate entry or the original entry may be temporarily modified. At block  240 , a modified balance sheet and modified income statement based on the reversed payable and accrual entries may be created. Referring to  FIG. 5 , a profit and loss statement is illustrated which indicates the changes made by the method. The first numbered column  400  indicates the status of the accounts using the cash basis accounting system and the second column  410  list the account status using the accrual method of accounting and the third column  420  illustrates the changes made by the system while changing from the accrual method of accounting to the cash method of accounting.  
         [0045]     Referring to  FIG. 6 , a balance sheet is illustrated which describes the balance sheet of Made Quick Company. The first numeric column  500 , lists the status of the balance sheet accounts using the cash basis of accounting. The second column  510  lists the status of the accounts using the accrual method of accounting. The third column  520  illustrates the differences to the various accounts when switching from the accrual method of accounting to the cash basis method of accounting using the method described.  
         [0046]     The method also allows for the reversal of payables and receivables when either an entire amount has yet to be received or an entire amount has yet to be paid, or when the amount of payment or the amount of payable has not been identified as relating to a specific sale or to a specific purchase. For example, if a customer made a payment without specifying what invoice the payment related to, the payment may not have been applied to any invoice. The system will keep the income as phantom income and it would be displayed on a profit and loss statement as other income. For example,  FIG. 7  illustrates a sales by item detail for Made Quick Company. Total amount paid  600  is listed as $21,434.00. Similarly,  FIG. 8  illustrates a Sales by Customer-Detail for Made Quick Company and also lists the amount of sales  700  as being $21,434.00. However,  FIG. 9  illustrates five payments were made which were not applied because they did not indicate a specific invoice to which they were scheduled to be applied. However, the money was actually received and needs to be recognized on the profit and loss statement. Accordingly, referring to  FIG. 5 , the $4,450.00 which was received is listed as being Phantom Income on  FIGS. 7, 8  and  9  and is disclosed as “Other Income” at entry  430 . This is just one example of the operation of the proposed system.  
         [0047]      FIGS. 10, 11  and  12  illustrate another example of the system.  FIG. 10  illustrates a display of a balance sheet using both accrual basis accounting and cash basis accounting. The accrual basis balance sheet is numbered as  1010  and the cash basis balance sheet is numbered as  1020 . Under the accounts receivable heading, the difference between the statements may be seen. For example, viewing the accrual method statement  1010 , the accounts receivable  1030  are listed as $1,764.41. This amount may relates to sale that have been made but where the money has not been collected for these sales. In the cash basis balance sheet  1020 , the accounts receivable amount  1040  is listed as being $0.00 which is correct because on a cash basis, only items where cash is actually received or actually paid is recognized. Similarly, viewing the accrual method statement  1010 , the inventory of raw materials amount  1050  is listed as $1147.50 and viewing the cash basis statement  1020 , the inventory of raw materials amount  1060  is listed as $0.00. This makes sense as in the cash basis statement, when inventory is purchased, the inventory is only booked as an expense. Using the accrual basis, inventory is booked as an asset and inventory items are only charged to expense when they&#39;re actually used.  
         [0048]     Viewing  FIG. 11 , the balance sheet from  FIG. 10  is continued, and  FIG. 11  lists the Liabilities and Equities. Viewing the accrual method statement  1110 , the accounts payable entry  1130  is listed as being $187.50. On the cash basis statement  1120 , the accounts payable amount  1140  is listed as $0.00. This makes sense because under the cash basis, unpaid bills are not part of the accounting system where in the accrual basis, unpaid bills are expensed, whether or not physically payment for the goods in question has been made. As a result of the changes, the reported net income on the cash basis statement  1160  is $1,299.01 and the reported net income on the accrual statement  1150  is $3,156.12.  
         [0049]     Similar changes can be seen in  FIG. 12 , which is an income statement computed using both the accrual basis  1210  and the cash basis  1220 . An example of the changes between the accrual income statement  1210  and the cash basis income statement  1220  is in the cost of goods sold section. In the cash basis statement  1120 , inventory is booked as an expense and shows up in account  1300 —Inventory of Raw Materials  1230  in the amount of $1,435.00. In the accrual statement  1210 , only the materials used are charges as an expense as illustrated by account  5100 —Material Purchases  1240  in the amount of $1,225.00.  
         [0050]     Finally, the changes from the accrual based system to the cash based system appear in the reported net income. In the accrual statement  1210 , net income is listed  1250  as $3,156.12 and in the cash statement  1220 , net income is listed  1260  as $1,229.01, thereby illustrating the potential for net income to be modified by switching the accounting basis for a business.