27 28 28 29 30 31 32 33 34 35 36 P2 Accrual income versus cash flow for a period Thomas Book Sales, Inc., supplies textbooks to college and university bookstores. The books are shipped with a proviso that they must be paid for within 30 days. For simplicity, assume there are no returns and no bad debts (i.e., bookstores pay on time). This year, Thomas shipped and billed book titles totaling $760,000. Collections during the year totaled $690,000. The company spent $300,000 acquiring the books it shipped. 1. Using accrual accounting and the preceding values, show the firm's net profit for the past year. 2. Using cash accounting and the preceding values, show the firm's net cash flow for the past year. 37 38 888 3. Explain why the accrual and cash accounting methods show different net profits. 39 How do the two profit figures provide different information to the financial manager? 40 41 42 43 44 15