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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

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 but can be returned for a full refund

credit within 90 days. In 2014, Thomas shipped and billed book titles totaling

$760,000. Collections, net of return credits, during the year totaled $690,000. The

company spent $300,000 acquiring the books that it shipped.

a. Using accrual accounting and the preceding values, show the firms net profit for

the past year.

b. Using cash accounting and the preceding values, show the firms net cash flow

for the past year.

c. Which of these statements is more useful to the financial manager? Why?

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