Question

Two college students just started new businesses. They have sought your advice on whether or not they should use cash- or accrual-basis accounting methods. You interviewed each and received the following responses:

Kyle's Lawn and Care Business

• Do you own any equipment or capital assets?
  • Yes, I own a truck and a riding lawn mower.
• Do you have any expenses?
  • I paid cash for my truck and mower, so I don't have payments. I do make one annual payment for insurance and pay for fuel for the lawn mower when I use it.
• How do your customers pay you?
  • I bill them monthly.

Haylee's Private Dance Instruction

• Do you own any equipment or capital assets?
  • No, I meet my clients at their own home or studio.
• Do you have any expenses?
  • Yes, I cover the cost of hydration drinks for my clients on the days they work out with me.
• How do your customers pay you?
  • They pay me on the day I provide the service in either cash or credit card payments using the Square App on my iPhone.

Formulate a thoughtful response in 100 to 250 words each to Kyle and Haylee. Include at least one reference and explain your response.

Answer 1