October 1, 2018 Ms. Amanda Sims Managing Partner ARP Associates 100 James Tower Denver, CO 80208 Dear Ms. Sims: I am responding to your suggestion that ARP Associates should change to the accrual method of accounting for tax means of reducing accounting fees. Under the accrual method of accounting, receivables must be recognized the services are performed. This is to be contrasted with the cash method of accounting, where no income is until payment is received. Each year under the accrual method, accelerated tax payments wouldoccur so long as the billing and collecti remains the same. Therefore, the partners will pay tax on an additional $ payments will not be recovered until the company ceases its operations. Assuming the partners are in the 35 tax bracket, the deferred taxes under the cash method are greater, on the deferred taxes, the additional accounting fees will be recovered. Therefore, I recommend that you continue to use the cashmethod. The partnership is not required to use the accrual method for tax 75,000V in the first year's inco 50,000 | X . If the partners earn a 2.29% Sincerely, Tara Kelly, CPA