Question

Mr.G Valley Jr.has come to see aboutan operating loan for his business

Answer 1

Answer:
The accrual basis of accounting provides a better picture of a company's profits during an accounting period. The reason is that the income statement prepared under accrual basis will report all the revenues actually earned during the period and all of the expenses incurred in order to earn the revenues.
Accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged. The term "accrual" refers to any individual entry recording revenue or expense in the absence of a cash transaction
1.Income in the amount of @25,00 has been accrued at the end of the above accounting Period. This amount should be considered as revenue hence it should be added to revenue.
2.Expenses in the amount $4000 have been incurred but not entered into the accounting records because the amounts have not been paid :- As per GAAP expenses should be recognised whenever accrued instead of on cash basis. Hence it should be added to expenses.
3.There is a $ 1000 allowance for uncollectable accounts. provision should be creating for this amount at the same time should be added to expenses.
4.the book value of fixed assets includes $5,000 for office it can be shown in company accounts. And $5,000 stereo system is using in home hence it can’t shown it in company accounts.
5.Intangible amount consisting of Research & Development cost of $100,0000 is treated as Expenses.
6. $40,000 Amount paid to friend for customer list is not allowed as business expenses and should not be considered as Intangible assets.
7.$10,000 for improvement to premises leased can be expenses off.