I am having difficult time with this online class. I have assignment due today. Can someone please help me?



Lawyer Smith completed a legal matter for the ACME Company on December 20, 2000, and sent ACME a bill for $5,000 which ACME paid on January 25, 2001. Lawyer Smith uses the cash basis of accounting, and ACME uses the accrual basis of accounting. Both use a calendar year for their fiscal year. (4 pts)

a) Under the accrual basis of accounting, revenue is to be recognized (i.e., appear on the income statement) in the period in which it is (fill the blank)

b) Lawyer Smith should report the revenue on her income statement for the year ending December 31, (indicate the year)
c) ACME should report the expense on its income statement for the year ending December 31, (indicate the year)

d) Explain the “matching principle” and indicate which of the two accounting systems, Smith’s or ACME’s, is more likely to adhere to the “matching principle”?

justwonder2

I hope this is correct... I believe it is.
1. earned
2. 2001 - cash basis, revenue is recognized when cash is received
3. 2000 - because he is on accrual bases, which means expense is recored when incurred
4. I know the answer should be ACME but I cannot really explain the matching principle, maybe you can look in the textbook.

Hope this helps

MaggieMouse

General rule:
Cash method-to record when cash is received or paid.
Accrual method-to record when activities are actually occured (realized).

Answers: Realized. 2001. 2000. Accrual provides good matching-expenses that correspond to income are recorded at the same period.

All these should be written in the first two charpters of any accounting textbook. Online class requires you to read your book more closely.