Question

An Illinois consulting firm had accounts receivable of $70,000 on December 31, 2015. During year 2016, the consulting firm collected $30,000 in fees from its clients. On December 31, 2016, it had accounts receivable of $100,000. On an accrual basis, what was the consulting firm's revenue for the year 2016?

Answer 1

Answer:

Revenue - 2016 = $60000

Explanation:

The accrual basis of accounting which follow the accrual principle states that the revenues and expenses for a period should match and should be recorded in the periods to which they pertain to. This means that even if a revenue has been earned and not yet received in cash, it will be recorded in the period in which it is earned.

To calculate the firm's revenue, we will use the following equation.

Revenue for the period = Closing Balance of Accounts receivable + Receipts - Opening Balance of Accounts receivable

Revenue - 2016 = 100000 + 30000 - 70000

Revenue - 2016 = $60000