Question
Why does an increase in prepaid expenses decrease accrual expense?
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Answer
It means cash was paid before the expense was incurred.
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Question
Why do tax-basis statements eliminate deferred taxes?
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Answer
They use tax return measurement, so book-tax differences are not tracked.
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Question
How are bad debts handled under tax-basis reporting?
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Answer
By the direct write-off method.
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Question
Why do accrued wages payable increases reduce cash-basis income when converting to accrual?
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Answer
They represent expenses incurred but not yet paid.
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