Question

In its first year of operations, roma co. earned $45,000 in revenues and received $37,000 cash from these customers. the company incurred expenses of $25,500 but had not paid $5,250 of them at year-end. the company also prepaid $6,750 cash for costs that will not be expensed until the next year. calculate the first year's net income under both the cash basis and the accrual basis of accounting.

Answer 1

Here you go,

Cash Accounting

Revenues(cash receipts).........................$37,000

Expenses($25,000-$5,250+$6,750)........$27,000

Net income...............................................$10,000

Accrual Accounting

Revenues(earned).................................................$45,000

Expenses(incurred)...............................................$25,500

Net Income............................................................$19,500