Answers homework week 4 - IFA

1.

Cash basis income statement Accrual basis income statement

Revenues Revenues

Cash sales $500.000 Sales to customers $750.000

Customer deposits $70.000

Expenses Expenses

Inventory purchases $90.000 Cost of sales $485.000

Wages paid $180.300 Wages expense $184.000

Utilities paid $17.200 Utilities expense $19.130

Net Income $282.500 Net Income $61.870



The accrual basis of accounting provides more useful information to investors, creditors etc.

Accrual basis accounting provides more useful information for external use and correctly reflects
all assets or liabilities of a company on a particular date.

Cash basis accounting normally postpones recognition of revenues and expenses, so it does not
necessarily reflect all assets or liabilities of a company on a particular date (for the balance
sheet).



2.

Balance sheet Income Statement

Transaction Assets Liabilities SE Revenues Expenses NI

a. 623 623
b. 6320 (E) 1.427

- 4893 (C)

c. – 5.300 - 5.000 - 300 300
d. 123.949 (C) 177.866 177.866 177.866
53.917 (AR)

e. 25.249 - 25.249 25.249 -25.249

f. -118.241 - 118.241 118.241

g. - 10.069 -10.069 10.069 -10.069

h. 38.200

- 38.200

i. 16.231 16.231