When converting an income statement from a cash basis to an accrual basis, cash received for services:
A) Exceeds service revenue.
B) May exceed or be less than service revenue.
C) Is less than service revenue.
D) Equals service revenue.

Question

Quizplus · Accepted Answer

Cash received for services may include prepayments or payments for services that have not been provided yet, which would result in cash received being greater than service revenue. On the other hand, there may be some revenue that has been earned but has not yet been received in cash, which would result in cash received being less than service revenue. Therefore, the answer is B, as it can vary.

When Converting an Income Statement from a Cash Basis to an Accrual