A company prepares its financial statements using the cash basis of accounting. During Year 1, it collected $200,000 from customers. <br/>- Beginning Accounts Receivable: $40,000<br/>- Ending Accounts Receivable: $60,000<br/>- Beginning Unearned Revenue: $10,000<br/>- Ending Unearned Revenue: $5,000<br/><br/>What amount of revenue should be reported on the accrual basis?

Accrual Revenue = Cash Collected + Change in AR + Change in Unearned Revenue (inverse).<br/>1. AR increased by $20,000 ($60k - $40k). This means $20,000 of sales were on credit and not yet collected. Add to cash.<br/>2. Unearned Revenue decreased by $5,000 ($10k - $5k). This means we earned $5,000 of revenue for which cash was collected in prior periods. Add to cash.<br/>Total Accrual Revenue = $200,000 + $20,000 + $5,000 = $225,000.