Lesson: Cash Basis to Accrual Basis Example

In this lesson, Nick Palazzolo, CPA, tackles the complexities of converting from the cash basis of accounting to the accrual basis through a detailed example. Using Northern Star Company's financial activities, Nick carefully dissects how cash collections, payments, and various balance sheet amounts are adjusted to compute the accrual basis of revenue, expenses, and net income. He explains each step of the process, from recognizing revenue when earned to accounting for unearned service revenue and prepaid expenses. Nick's approachable and thorough explanation helps demystify these critical adjustments, equipping viewers with the ability to tackle similar problems and understand the underlying concepts of these foundational accounting principles.