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Cash and Accrual basis accounting
Asked Jun 22, 2007, 11:38 PM
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1 Answer In the first year of operations, Harden Co. Earned $39,000 in revenues and received $33,000 cash from this customers. The company incurred expenses of $22,500 but had not paid $2,250 of them at year-end. Harden also prepaid $3,750 cash for expenses that would be incurred the next year. Calculate the first year's net income under the cash basis and accrual accounting. |
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| Under cash basis revenue is earned when cash is received, and expenses are incurrred when they are paid. Rev:.......................$33,000 Exp........................$24,000 Net income...............$9,000 Expenses comp: Paid expenses ($22,500 - $2,250)...20,250 Prepaid exp...................................$3,750 Expense........................................24, 000 Under accrual Revenues...........$39,000 Expense............$22,500 Income..............$16,500 | ||||
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