Explain how accrual accounting differs from cash-basis accounting
Response to the following problem:
Southeast Corporation made sales of $825 million during 2014. Of this amount, Southeast collected cash for all but $27 million. The company's cost of goods sold was $255 million, and all other expenses for the year totaled $325 million. Also during 2014, Southeast paid $350 million for its inventory and $255 million for everything else. Beginning cash was $75 million. Southeast's top management is interviewing you for a job and they ask two questions:
a. How much was Southeast's net income for 2014?
b. How much was Southeast's cash balance at the end of 2014?
You will get the job only if you answer both questions correctly.