TLR Consulting keep their accounting records using the cash basis.During 2014,they collected $275,000 from clients.On December 31,2013 they had accounts receivable of $50,000 and on December 31,2014 they had accounts receivable of $35,000.Additionally,they had unearned revenues of $7,000.Using the accrual basis of accounting,what did TLR Consulting earn in service fees for 2014?
A)$253,000
B)$267,000
C)$283,000
D)$297,000

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, revenue is recognized when earned, regardless of when cash is received. In this case, TLR Consulting earned $275,000 in service fees during 2014, plus the $7,000 of unearned revenue that was earned during the year. However, they also had a decrease in accounts receivable of $15,000 ($50,000 - $35,000), which means that they collected $15,000 less than they earned. Therefore, their total revenue for the year under the accrual basis of accounting is $275,000 + $7,000 - $15,000 = $267,000.

TLR Consulting Keep Their Accounting Records Using the Cash Basis