Question

More Info August 1 Prepaid insurance for August through October, $1,500. 4 Purchased office furniture for cash, $3,500. 5 Performed services and received cash, $1,600. 8 Paid advertising expense, $300. 11 Performed service on account, $3,400. 19 Purchased computer on account, $1,500. 24 Collected for August 11 service. 26 Paid account payable from August 19. 29 Paid salary expense, $800. 31 Adjusted for August insurance expense (see August 1). 31 Earned revenue of $400 that was collected in advance back in July. 31 Recorded August depreciation expense on all fixed assets, $308. Print Done

Answer 1

Answer is given below

for drop down boxes answer is given based on conceptual understanding since answer in drop down boxes are not given in question

Amount of Revenue (Expense) for August Cash basis Accrual basis Revenue or (Expenses) Revenue or (Expenses) August 1 -$1,500 $1,600 $300 $1,600 -$300 $3,400 $3,400 -$800 -$800 -$500 ($1,500/3) $400 -$308 2 Income (Loss) before tax $2,400 $3,492 3 The accrual measure of net income is preferable because it accounts for revenues and expenses when they are earned and incurred. not when they are collected or paid For example, on August 11, the company accrued $3,400 of revenue and increased its wealth as a result The accrual basis records this revenue but the cash basis ignores it On August 24, the business collected the receivable that was created by the revenue earned on account at August 11. The accrual basis records no revenue on august 24th because the company's increase in wealth occurred back on August 11th The cash basis waits until the cash is received on August 24th to record the revenue