ACCT 323
CASH v. ACCRUAL
HANDOUT PROBLEM
For the year ended 12-31-08, Y-ME Co. had a Net Cash Flow (Cash-in less Cash-
out) of $321,654. Based on the following information about the company, make
the "paper adjustments" to get to Net Income. For each item, explain why the Net
Cash Flow number must be “adjusted”. DON’T just say something like “Because
Accounts Receivable INCREASED”. Instead, say something like “This represents a
CURRENT PERIOD REVENUE, but there was no Cash inflow included in this
period’s Net Cash Flow”.
Balance at Balance at
12-31-08 12-31-07
1. Prepaid Rent $500,000 $600,000
2. Bond Payable 250,000 230,000
3. Common Stock 220,000 280,000
4. Rent Payable 40,000 25,000
5. Unearned Revenue 100,000 60,000
6. Income Taxes Payable 33,000 0
Start Here
Cash Flow as Reported --------------------------------------------------------- $321,654
