You were engaged to audit the books of DEF Corporation who is in its first year and is using the cash basis of accounting. From the records of the company, you gathered the following cash receipts and disbursement records for 2018: Cash Receipts, P483,000; and Cash Disbursements, P247,500. The management requested you to compute its income under accrual basis. The following information are deemed relevant in your analysis: a. Depreciation of plant assets for 2018 computed by the straight-line method is P31,500. b. Prepaid insurance of P5,400, two thirds of which relates to 2019, is included in the 2018 cash disbursements figure. This amount was recognized as insurance expense when it was paid. c. DEF Corporation received P36,000 in advance rent for space in its building. The entire amount is included in the cash receipts figure and was recognized as rent revenue when received, However, P20,000 of it was for space that will be provided in 2019. d. Employees are due P10,600 at the end of 2018. Interest amounting from an investment of 170,500 earnings interest at 10% has been accrued for 6 months at the end of 2018. e.

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Q: What are the differences between cash and accrual basis accounting? Provide an example of each

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Q: How revenues and expenses are are recognized under the accrual accounting?

A:

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Q: What does the accrual-accounting model measures?

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Q: What is the difference between cash basis accounting and accrual basis accounting?

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Q: Distinguish between cash-basis net income and accrual-basis net income.

A:

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Q: what items are included in an income summary repor?

A: An income summary account is prepared at the end of accounting period to which all the incomes and…

Q: How is unearned revenue classified on the balance sheet?

A:

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Q: What items are not presented on the income statement?

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Q: How to compute the amount of net income or net loss

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Q: What steps are taken to prepare Income and Expenditure Account from a Receipt and Payment Account?

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Q: What is referred by unearned income? How is it adjusted in the final accounts?

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Q: The accrual basis of accounting records expenses when they are :

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Q: What does the term 'accrual accounting principle' mean

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