You operate a small nonprofit that provides subsidized tutoring services to high school students in underserved areas. Approximately 60% of the direct costs of tutoring are billed to schools attended by your clients, while approximately 20% are billed directly to the students. The remainder that is not covered by program operating revenues must be covered out of general operating funds provided by foundations and individual donations.
You are asked to build a cash budget for program revenues. Assume the following:
- Of the expenses billed directly to schools, two thirds are paid in the month following delivery of service, with the remainder paid the next month (that is, two months following delivery of services).
- Of the expenses billed to families, 80 percent are paid in the month following delivery of service; 10 percent are paid the following month; and 10% are not paid at all.
- In January, February, and March, program expenditures on services provided are $30,000; $36,000; and $27,000 respectively.
What is the definition of accrued versus cash revenues?
a. Cash revenues are the amount received, while accrued revenues are cash billings minus bad debt.
b. Accrued revenues are the amount owed for services rendered during a particular time period, while cash revenues are the amount received during the time period.
c. In calculating accrued revenues, one should factor in expected bad debt.
d. Both B and C.
e. Both A and C.