Advise Al on which method of accounting should be used

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Question - Al is a medical doctor who conducts his practice as a proprietor. During 2013, he received cash of $280,000 for medical services. Of the amount collected, $40,000 was for services rendered in 2012. At the end of 2013, Al had accounts receivable of $60,000, all for services rendered in 2013. In addition, at the end of the year, Al received $12,000 as an advance payment from a health maintenance organization (HMO) for services to be rendered in 2014. Compute Al's gross income for 2013:

a. Using the cash basis of accounting.

b. Using the accrual basis of accounting.

c. Advise Al on which method of accounting should be used.

Reference no: EM131923269

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