Purchase various shop supplies from CAPA Auto Parts; the cost was $1400, due in 30 days. In accrual accounting basis, it should be: Shop Supplies 1400 A/P 1400 How about in cash basis? Should I record the transaction after 30 days as below? Is it correct? Shop Supplies 1400 cash 1400
Purchase various shop supplies from CAPA Auto Parts; the cost was $1400, due in 30 days. In accrual accounting basis, it should be: Shop Supplies 1400 A/P 1400 How about in cash basis? Should I record the transaction after 30 days as below? Is it correct? Shop Supplies 1400 cash 1400
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Purchase various shop supplies from CAPA Auto Parts; the cost was $1400, due in 30 days.
In accrual accounting basis, it should be:
Shop Supplies 1400
A/P 1400
How about in cash basis?
Should I record the transaction after 30 days as below? Is it correct?
Shop Supplies 1400
cash 1400
Expert Solution
Step 1
Lets understand the basics.
There are one of the two type of accounting system is followed by the entity which are,
(A) Cash basis
(2) Accrual basis
In cash basis, tranasction is recorded when actual cash receipt and payment is made.
In accrual basis, transaction is record as and when accrued and not when cash receipt or payment is occured.
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