Manny and Minnie Walker have been operating the Penguin View Motel for several years. Set out below are transactions incurred for the motel for the month of August 2013.

Required:
a) Prepare an income statement for August 2013 for the Penguin View Motel from the above transactions.
b) Explain the meaning of accrual accounting and discuss why accountants use this approach to measure profit.

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2013 Asset, (A) Increase Amount Liability (L) decrease Equity (OE) Account Names August Dec Dec Dec Dec Dec Dec Inc nc Inc nc Dec Dec Inc Dec Inc nc Dec Accumulated depreciation Negative AssInc 4 000 4 000 1 300 1300 440 440 4 400 4 400 4 260 4 260 800 800 4 260 4 260 5 000 5 000 1000 1000 OE Interest expense Bank Electricity Bank OE 6 Advertising OE Bank Bank Income earmed OE 12 Accounts receivable Income earmed OE 22 Drawings OE Bank 27 Bank Accounts receivable 30 Capital account Manny OE Bank 31 Depreciation of equipment OE