Chapter 3, Problem 3.19E

1.

To determine

Accrual Accounting

Accrual accounting refers to the accounting system where revenues and expenses are recognized and recorded as and when it is earned or expenses irrespective of the exchange of cash. Accrual accounting presents a true and fair view of the state of affairs of the business than the cash basis of accounting. Accrual basis of accounting affirms the time period concept, revenue recognition concept, and matching principle of accounting as required by Generally Accepted Accounting Principles (GAAP).

Revenue Recognition Principle: The revenue recognition principle refers to the timing of the revenue recognition and the amount of the revenue to be recorded in the specified time.

Matching Principle: Matching principle refers to the recording of expenses incurred to match against, and earn the revenues during the particular accounting period.

To Indicate: The given revenue and expense to be categorized as cash basis accounting or accrual basis accounting in a tabular format.

2.

To determine

To Calculate: The net income or net loss for Company CC under cash basis and accrual basis of accounting for the month of May.