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-   -   Cash and Accrual basis accounting (https://www.askmehelpdesk.com/showthread.php?t=103595)

  • Jun 22, 2007, 11:38 PM
    lariza
    Cash and Accrual basis accounting
    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.
  • Jun 23, 2007, 12:51 AM
    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

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