Scribd Logo
Upload

Welcome to Scribd!

  • 11 views

    Accounting E3 19 Answer

    Uploaded by

    Harsh Jaiswal
    The document provides revenue and expense amounts for a catering business in May under both cash basis and accrual basis accounting. It calculates that under cash basis, the net income is a loss of $1,700, while under accrual basis the net income is a gain of $3,260. It states that accrual basis gives a truer picture of earnings as it follows the revenue recognition and matching principles by recording revenues when earned and expenses when incurred.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content

    You might also like

    Accounting E3 19 Answer

    Uploaded by

    Harsh Jaiswal
    11 views2 pages
    The document provides revenue and expense amounts for a catering business in May under both cash basis and accrual basis accounting. It calculates that under cash basis, the net income is a loss of $1,700, while under accrual basis the net income is a gain of $3,260. It states that accrual basis gives a truer picture of earnings as it follows the revenue recognition and matching principles by recording revenues when earned and expenses when incurred.

    Original Description:

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    The document provides revenue and expense amounts for a catering business in May under both cash basis and accrual basis accounting. It calculates that under cash basis, the net income is a loss of $1,700, while under accrual basis the net income is a gain of $3,260. It states that accrual basis gives a truer picture of earnings as it follows the revenue recognition and matching principles by recording revenues when earned and expenses when incurred.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    11 views2 pages

    Accounting E3 19 Answer

    Uploaded by

    Harsh Jaiswal
    The document provides revenue and expense amounts for a catering business in May under both cash basis and accrual basis accounting. It calculates that under cash basis, the net income is a loss of $1,700, while under accrual basis the net income is a gain of $3,260. It states that accrual basis gives a truer picture of earnings as it follows the revenue recognition and matching principles by recording revenues when earned and expenses when incurred.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 2

    E3-19 Answer:-

    Requirement 1:-

    Amount of Revenue (Expense) for May

    Date Cash Basis Amount of Accrual Basis Amount of


    Revenue (Expense) Revenue (Expense)

    May
    1 ($1,500) ($0)

    5 (400) (400)

    9 2,600 2,600

    14 (2,400) 0

    23 0 3,000

    31 0 (500) *

    31 0 (1,400)

    31 0 (40)

    *Calculations:

    $1,500 Rent prepaid on May 1 for 3 months

    ÷3 Months

    $500 Rent expense for May

    Requirement 2:-
    ● Net income (loss) under cash basis is ($1,700).

    *Calculations:

    Net Income (Loss) = Total Revenues – Total Expenses


    = $2,600 – [$1,500 + $400 + $2,400]
    = $2,600 – $4,300
    = ($1,700)

    ● Net income (loss) under accrual basis is $3,260.

    *Calculations:

    Net Income (Loss) = T R – TE


    = [$2,600 + $3,000] – [$400 + $500 + $1,400 + $40]
    = $5,600 – $2,340
    = $3,260

    Requirement 3:-

    Accrual basis accounting gives the best picture of the true earnings of Sweet Catering,
    because revenues are recorded when earned and expenses are recorded when incurred, as
    dictated by the revenue recognition principle and the matching principle.

    Requirement 4 (Extra bonus):- $100/- (My tuition fees)

    Just kidding.. xD

    You might also like