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pe naut geh PROBLEMS 1. What is the year-end balance if the cash basis of accounting is used? What is the balance if the modified accrual basis is used? $420,000 Beginning-year fund balance • Year-end revenues $8,920,000 • Year-end expenditures $8,875,000 $259,000 • Year-end outstanding purchase orders $206,000 • Year-end contractual commitments

pe naut geh PROBLEMS 1. What is the year-end balance if the cash basis of accounting is used? What is the balance if the modified accrual basis is used? $420,000 Beginning-year fund balance • Year-end revenues $8,920,000 • Year-end expenditures $8,875,000 $259,000 • Year-end outstanding purchase orders $206,000 • Year-end contractual commitments

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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pe naut geh PROBLEMS 1. What is the year-end balance if the cash basis of accounting is used? What is the balance if the modified accrual basis is used? $420,000 Beginning-year fund balance • Year-end revenues $8,920,000 • Year-end expenditures $8,875,000 $259,000 • Year-end outstanding purchase orders $206,000 • Year-end contractual commitments
Transcribed Image Text:pe naut geh PROBLEMS 1. What is the year-end balance if the cash basis of accounting is used? What is the balance if the modified accrual basis is used? $420,000 Beginning-year fund balance • Year-end revenues $8,920,000 • Year-end expenditures $8,875,000 $259,000 • Year-end outstanding purchase orders $206,000 • Year-end contractual commitments
Expert Solution
Step 1

Cash Basis Accounting 

  • In cash basis accounting, Sales are recognized only when cash is received
  • Expenses are recognized only when cash is paid
  • It is not accordance with GAAP therefore it is less accurate

 

Accrual Basis Accounting

  • Under Accrual Basis accounting, Sale is recognized when it is generated
  • It matches expenses with the sales when sales are generated
  • It is in accordance with GAAP and it is more accurate

Modified Accrual Basis of Accounting

It is basically a mixture of cash basis accounting and accrual basis accounting

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