Comparing accrual and cash-basis accounting [5 min]
Suppose you work summers house-sitting for people while they are away on vacation. Some of your customers pay you immediately after you finish a job. Some customers ask you to send them a bill. It is now June 30 and you have collected $900 from cash-paying customers. Your remaining customers owe you $1,300.
Requirements
1. How much service revenue would you have under the
a. cash basis?
b. accrual basis?
2. Which method of accounting provides more information about your house-sitting business?
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