In its first year of operations, Roma Company reports the following.• Earned revenues of $45,000 ($37,000 cash received from customers).• Incurred expenses of $25,500 ($20,250 cash paid toward them).Prepaid $6,750 cash for costs that will not be expensed until next year.Compute Roma's first-year net income under the cash basis and the accrual basis of accounting.RevenuesExpensesNet incomeCash BasisAccrual Basis

Answered: e cash basis and the accrual basis of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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In its first year of operations, Roma Company reports the following.
• Earned revenues of $45,000 ($37,000 cash received from customers).
• Incurred expenses of $25,500 ($20,250 cash paid toward them).
Prepaid $6,750 cash for costs that will not be expensed until next year.
Compute Roma's first-year net income under the cash basis and the accrual basis of accounting.
Revenues
Expenses
Net income
Cash Basis
Accrual Basis

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Cash Basis and accrual Basis are accounting methods that differ in revenue and expense recognition. In Cash Basis, revenues and expenses get recognized when payment is made and cash is received. Under accrual basis, only revenues and expenses incurred for that period are recognized.

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