Video: Special Purpose Frameworks: Accrual vs Cash Basis Accounting Summary

In this lesson, Nick Palazzolo, CPA, caps off the discussion with a concise summary of key considerations when converting from cash to accrual accounting. He delves into the significance of certain accounts like receivables, payables, prepaids, and unearned revenue that are crucial for this conversion process. Additionally, Nick clarifies the criteria for revenue and expense recognition in each accounting method, focusing on the timing of these transactions. He assures everyone with the reminder that the exam is a marathon, and with continued effort, success is within reach.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Back again. Let's wrap up with a summary on what we just saw. First, I'm going to tell you to understand which accounts are important for converting cash to accrual. Those are going to be the receivable accounts, the payable accounts, the prepaid, the unearned, anything that could defer payment or receipt over the different periods. That's what you're primarily going to see.

Yeah, like depreciation. Obviously. In this case, we saw that. However, if this was real life, this was actually at work, depreciation might just be a different depreciation schedule, a different depreciation method. Secondly, understand when and how revenue and expenses are recognized in each method.

We went over that for sure. When incurred or when received, when earned, when paid. All that. So thinking about those possibilities of when you could recognize each of revenues and expenses. Patel, you definitely enjoyed this one. I did as well.

It's a good one. Keep going strong. This exam is a marathon and you have the best shot at it. Got some faith in you. See you next time.

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