Comparing accrual and cash-basis accounting, preparing adjusting entries, and preparing in...

Comparing accrual and cash-basis accounting, preparing adjusting entries, and preparing income statements

Carolina’s Golf School completed the following transactions during October 2012:

Requirements

1. Prepare journal entries for each transaction.

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2. Using the journal entries as a guide, show whether each transaction would be handled as a revenue or an expense, using both the accrual and cash basis, by completing the following table:

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3. After completing the table, calculate the amount of net income or net loss for the company under the accrual and cash basis for October.

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4. Considering your results from Requirement 3, which method gives the best picture of the true earnings of Carolina’s Golf School? Why?