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Concept explainers
Concept Introduction:
Accounting is an art of recording, classifying, analyzing and summarizing the financial statement to produce meaningful information and reports.
Accounting is done with two methods as follows:
Cash Basis accounting: Under the cash basis accounting all the cash receipts for the period are considered as revenue and all the cash payments for the period are considered as expenses and net income us calculated.
Accrual Basis accounting: Under the accrual basis, the revenue and expenses are recorded accreting to their accrual for the given period and cash receipts and payments are not considered to decide their accrual. The net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.
Requirement-1:
To Calculate:
The amount of net income reported on cash basis for each of the three months.
Concept Introduction:
Accounting is an art of recording, classifying, analyzing and summarizing the financial statement to produce meaningful information and reports.
Accounting is done with two methods as follows:
Cash Basis accounting: Under the cash basis accounting all the cash receipts for the period are considered as revenue and all the cash payments for the period are considered as expenses and net income us calculated.
Accrual Basis accounting: Under the accrual basis, the revenue and expenses are recorded accreting to their accrual for the given period and cash receipts and payments are not considered to decide their accrual. The net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.
Requirement-2:
To Calculate:
The amount of net income reported on accrual basis for each of the three months.
Concept Introduction:
Accounting is an art of recording, classifying, analyzing and summarizing the financial statement to produce meaningful information and reports.
Accounting is done with two methods as follows:
Cash Basis accounting: Under the cash basis accounting all the cash receipts for the period are considered as revenue and all the cash payments for the period are considered as expenses and net income us calculated.
Accrual Basis accounting: Under the accrual basis, the revenue and expenses are recorded accreting to their accrual for the given period and cash receipts and payments are not considered to decide their accrual. The net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.
Requirement-3:
To Indicate:
The reason of preferring the accrual basis accounting.
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Chapter 3 Solutions
Cornerstones of Financial Accounting
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
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