Chapter 3, Problem 2QS

To determine

Concept Introduction:

Methods of Accounting: There are two methods of accounting- cash basis and accrual basis.

Cash Basis records the transactions when they actually happen in cash i.e., when expenses are paid in cash and on cash receipts of revenue.

Accrual Basis records the transactions when they are actually incurred or earned regardless of the actual flow of cash i.e., when expenses are incurred and revenues are booked on the basis of services rendered.

To Determine: The net income under both the cash basis and the accrual basis of accounting