Chapter 3, Problem 12BE

To determine

Cash base accounting: Cash base accounting is a method of accounting that identifies the income and expenses at the physical time period. This method contrasts the major accounting methods which identifies income in the company’s books at the particular time when the revenue is earned but not required to be received and record expenses when the liabilities are incurred but not mandatory to be paid.

Accrual base accounting: Accrual base accounting method measures the actual performance with the business situation by recognizing financial or monetary or economic events regardless occurrence of cash transactions. The main idea is the economic events are identified by corresponding revenues to expenses from time to time in which the deal occurs rather than payment is received. This procedures permits the current cash flows, and gives precise picture of the financial position of the company.

To prepare: To prepare the year end service revenue and operating expenses of SK Company.

To determine

To prepare: To prepare the operating expenses of SK Company.