Chapter 4, Problem 4.6E

(a)

To determine

Cash basis of accounting

Cash basis of accounting refers to the recognition of financial transactions only when the cash is received or paid.

Accrual basis of accounting:

Accrual basis of accounting refers to recognizing the financial transactions during the period in which the event occurs, even if the cash is not exchanged.

Income statement:

This is the financial statement of a company which shows all the revenues earned and expenses incurred by the company over a period of time.

Classified balance sheet:

This is the financial statement of a company which shows the grouping of similar assets and liabilities under subheadings.

To prepare:  The accrual-basis income statement of Company K.

(b)

To determine

To prepare:  The classified balance sheet statement of Company K as at April 30, 2014