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?
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THANK YOU!
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