Question 1

Suppose you have been given a job as an Accounting Clerk in a retail store and have been asked
customers pay immediately for services rendered while a few pay sometime later. As at Decemb
by other customers for services rendered within the same period. Advice the manager how muc
for the period in question.

Answer: In cash basis accounting, only transactions in which cash is exchanged are recorded, w
been earned and expenses incurred), unlike cash basis accounting, accrual basis accounting reco
this principle, I will advice the manager to record the $30,000 collected from customers under t
the customers. The manager should not record the $25,000 under the cash basis accounting be
according to the cash basis accounting, only transactions in which cash is actually exchanged sh
and $25,000 in the accrual basis accounting, since this will be in concordance with the accountin

Question 2
Unadjusted Trial Balance Adjustments Adjusted Trial Balance
Account title Debit ($) Credit ($) Debit ($) Credit ($) Debit ($)
Cash 2,065 2,065
Accounts receivable 2,220 500 2,720
Supplies 2,000 1,240 760
Furniture 14,200 14,200
Prepaid Insurance 985 100 885
Accounts payable 1,260
Salary payable 4,000
Owner capital 11,000
Owner withdrawal 2,000
Service revenue 14,340 500
Salary expense 8,275 8,275
Supplies expense 1,600 1,240 2,840
Insurance expense 800 100 900
Utilities expense 455 455
32,600 32,600
Accumulated depreciation- furniture 360
Depreciation expense 360 360
Total 2,200 2,200 33,460
 store and have been asked by the manager for advice on an accounting issue. You were told that most of the
metime later. As at December 31st, 2013 the company collected $30,000 from its cash customers, while $25,0
dvice the manager how much should be recorded as service revenue under the cash basis and accrual basis of

exchanged are recorded, while in accrual basis all transactions are recorded (i.e., all transactions in which rev
ccrual basis accounting records transaction even when services are rendered and products are sold on accoun
ed from customers under the cash basis accounting system and since the cash was actually received by the co
e cash basis accounting because that amount is still outstanding (owed to the company and has not yet been
sh is actually exchanged should be recorded. However, I will advice the manager to go ahead and record both
ordance with the accounting principle.

Adjusted Trial Balance

Credit ($)

1,260
4,000
11,000
2,000
14,840

360

33,460
old that most of the companies
tomers, while $25,000 is owed
and accrual basis of accounting

actions in which revenue has

s are sold on account. Based on
y received by the company from
nd has not yet been paid) and
ead and record both the $30,000
 Blum Services
Trial balance
Unadjusted Trial Balance Adjustments
Account title Debit Credit Debit Credit
Cash $12,900
Prepaid Insurance $2,000 $325
Office Supplies $1,300 $1,050
Office equipment $10,500
Accumulated depreciation - office equipment $3,500 $1,800
Accounts payable $2,900
Salaries payable $0 $900
Unearned service revenue $4,500 $2,000
A.L.Blum, capital $11,750
A.L.Blum, drawing $5,600
Service revenue $13,350 $2,000
Salary expense $3,700 $900
Depreciation expense $0 $1,800
Supplies expense $0 $1,050
Insurance expense $0 $325
Total $36,000 $36,000 $6,075 $6,075
 Adjusted Trial Balance
Debit Credit
$12,900
$1,675
$250
$10,500
$5,300
$2,900
$900
$2,500
$11,750
$5,600
$15,350
$4,600
$1,800
$1,050
$325
$38,700 $38,700
 Deavours Photography (Fin
Income Statement Statement of Change in Owner's Equi
For the year ended December 31,2012 For the year ended December 31,201
Account title Amount ($) Account title
Revenues C. Devours, capital a/c
Service revenue a/c $15,350 Net income
C. Devours, drawings a/c
Expenses Total Owner's equity/capital
Salaries expense a/c $4,600
Depreciation expense a/c $1,000
Supplies expense a/c $400
Insurance expense a/c $2,000
Total expenses $8,000

Net income $7,350

otography (Financial Statements)
nge in Owner's Equity Balance Sheet
d December 31,2012 For the year ended December 31,2012
Amount ($) Account title Amount ($)
$7,450 Assets
$7,350 Cash a/c $2,000
($5,600) Prepaid Insurance a/c $2,000
$9,200 Office Supplies a/c $600
Office equipment a/c $16,000
Total assets $20,600

Liabilities
Accumulated depreciation a/c $3,000
Accounts payable a/c $5,000
Salaries payable a/c $900
Unearned service revenue a/c $2,500

Total liabilities $11,400

Total Owner's equity/capital $9,200
Sum of liabilities & Owner's equity $20,600
Noteworthy Communications'
Balance Sheet
For the year ended December 31, 20X6
Account Title Amount ($)
Current assets
Accounts receivable a/c $6,600
Cash a/c $16,500
Supplies a/c $2,500
Prepaid Insurance a/c $1,100
Prepaid rent a/c $6,600
Long-term/Fixed assets
Equipment a/c $114,400
Accumulated depreciation - equipment a/c ($37,800)
Computers a/c $22,700
Accumulated depreciation - computers a/c ($11,600)
Other assets $3,600
Total assets $124,600

Current liabilities
Accounts payable a/c $15,100
Interest payable a/c $600
Salary payable a/c $3,900
Unearned service revenue a/c $5,400
Other current liabilities $4,700
Long-term liability
Note payable a/c $27,800
Total liabilities $57,500

Capital
Lori Stone, Capital $67,100

Total liabilities & Capital $124,600

 Lane's Interiors Trial Balance for May 31, 20X6
Unadjusted Trial Balance Adjustments
Account Title Debit Credit Debit Credit
Cash $4,300
Notes receivable $10,300
Interest receivable $200
Supplies $500 $100
Prepaid Insurance $1,700 $300
Furniture $27,400
Accumulated depreciation: Furniture $1,400 $500
Building $53,900
Accumulated depreciation: Building $34,500 $400
Land $18,700
Accounts payable $14,700 $100
Interest payable $200
Salary payable $600
Unearned Service revenue $8,800 $4,400
Note payable, long-term $18,700
K.Lane, Capital $29,900
K.Lane, Withdrawals $3,800
Service revenue $16,800 $4,400
Interest revenue $200
Salary expense $2,100 $600
Insurance expense $300
Interest expense $200
Utilities expense $1,100
Advertising expense 1,000 $100
Supplies expense $100
Depreciation expense - Furniture $500
Depreciation expense - Building $400
Total $124,800 $124,800 $6,800 $6,800
May 31, 20X6
Adjusted Trial Balance
Debit Credit
$4,300
$10,300
$200
$400
$1,400
$27,400
$1,900
$53,900
$34,900
$18,700
$14,800
$200
$600
$4,400
$18,700
$29,900
$3,800
$21,200
$200
$2,700
$300
$200
$1,100
$1,100
$100
$500
$400
$126,800 $126,800