Question

Cuisine Catering completed the following selected transactions during May 2018: Click the icon to view the transactions.) Read the requirements. Requirement 1. Show whether each transaction would be handled as a revenue or an expense using both the cash basis and accrual basis accounting systems by completing the table provided. (Expenses should be shown in parentheses.) Also indicate the dollar amount of the revenue or expense. The May 1 transaction has been completed as an example. (Enter "O" for any transactions that do not affect revenues or expenses.) Amount of Revenue (Expense) for May Cash Basis Amount Accrual Basis Amount of Revenue (Expense) of Revenue (Expense) $ (2,100) Date May 1 May 5 May 9 May 14 May 23 May 31 May 31 May 31 rent salary depr

Answer 1

1	Amount of revenue (expense) for May
	Date	Cash basis amount of revenue (expense)	Accrual basis amount of revenue (expense)
	May 1.	-2100	0
	May 5.	-400	-400
	May 9.	2700	2700
	May 14.	-2100	0
	(Note:1)
	May 23.	0	3300
	May 31.
	(2100/3)	0	700
	May 31.	0	1900
	May 31.	0	35
	Note:1
	On May 14,cash paid for Kitchen equipment
	This expense is of a capital nature.Hence, it should not be recorded in accrual basis.
2	Net income:
	Date	Cash basis amount of revenue (expense)	Accrual basis amount of revenue (expense)
	May 1.	-2100	0
	May 5.	-400	-400
	May 9.	2700	2700
	May 14.	-2100	0
	(Note:1)
	May 23.	0	3300
	May 31.
	(2100/3)	0	-700
	May 31.	0	-1900
	May 31.	0	-35
	Net income	-1900	2965
	(Total of above)
3	The Accrual basis gives the best picture of the true earnings of cuisine catering because revenues are recorded when earned
	and expenses are recorded when incurred, as dictated by the revenue recognition principle and the matching principle