Question

Sweet Catering completed the following selected transactions during May 2016: May 1: Prepaid rent for three months. 3.000 May 5: Received and paid electricity bill, 550 May 9: Received cash for meals served to customers, 5160 May 14: Paid cash for kitchen equipment, 52.440 • May 23: Served a banquet on account, 52,150 • May 31: Made the adjusting entry for rent (from May 1). • May 31: Accrued salary expense, 5170 • May 31: Recorded depreciation for May on kitchen equipment, 5440 If Sweet Catering had recorded transactions using the Cash method, how much net income doss) would they have recorded for the month of May? if there is a loss.enter it with parentheses or a negative sign 770 if Sweet Catering had recorded transactions using the Accrual method, how much net income (loss) would they have recorded for the month of May? If there is a los enter it with parentheses or a negative sign 650

Answer 1

In cash basis accounting , revenue and expenses are recognised ony when cash is recieved or paid not when accrued

Expenses as per cash basis = 3,000 + 50

Revenue as per cash basis = 160

Net income = Revenue - Expense

= 160 - 3,050

= - 2890 (loss)