Hi I came across this question and I do not understand the solution.

Co A uses an accrual basis for financial reporting purposes and cash basis for tax purposes.

Cash collections are $476,000, and accrued revenue is only $376,000.

Assume expenses at 50% in both cases (i.e., $238,000 on cash basis and $188,000 on accrual basis), and a tax rate of 34%. What is the dta/dtl?

Part of the solution given is

taxable income ($238,000)

pretax income ($188,000). It states in the question that the company uses an accrual bais for financial reporting. DOES THIS MEAN I ONLY HAVE To TAKE NOTE OF THE ACCRUAL numbers when calculating the numbers in the financial reporting statements? No need to take into account the cash numbers?

I thought on the financial reporting statements it should be:

Revenue (476 000 + 376 000) 852 000

Less Expenses (238 000 + 188 000) (426 000)

Profit before Tax 426 000

Tax (34 %) (144 840)

Profit After Tax 281 160



No need.