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.

bhet

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