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For May, what is net income or net loss using cash basis accounting and what is net income or loss using accrual basis accoun

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Answer #1

Cash Basis:

May1) Prepaid rent : (1500)

May5) Received and Paid electricity bill :(250)

May9) Recieved cash for meal served to customers : 2000

May14) Paid cash for kitchen equipment : Acquisition of fixed asset hence it is a balance sheet item.

May 23) Served a banquent on account: No cash transaction involved

May31) Adjusting entry : No cash involved.

May31) Accrued salary expense : No cash involved

May31) Depreciation : Non cash expense.

Thus Net income = (1500)+(250)+2000

= - 1500-250+2000

= $250

Accrual Basis:

May1) Prepaid rent : Since it is paid in advance not considered as expense for current month

May5) Received and Paid electricity bill : (250)

May9) Recieved cash for meals: 2000

May14) Paid cash for kitchen equipment : Fixed asset

May23) Served a banquet on account : 3000

May31) Adjusting entry : 1500/3=(500) for one month

May31) Accrued salary : (1700)

May31) Depreciation : (70)

Thus Net income/ loss = 250 +(250)+2000+3000+(500)+(1700) +(70)

= -250+2000+3000-500-1700-70

=$2,480

ANY DOUBTS OR CORRECTIONS?

JUST LEAVE A COMMENT BELOW

THANK YOU!

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