Lisa and Laura are twins who own a seafood restaurant in a coastal town. Lisa likes to report her income statement using accrual accounting, and Laura likes to report her income statement using cash accounting. Given the following information, complete the spreadsheet for March using both accrual accounting for Lisa and cash accounting for Laura.

The restaurant generated $45,000 in revenue, but only received $30,000.

Cost of food sold was $14,000, but only 60% was paid to the supplier.

Salaries and wages were $13,000, but only 50% was paid to employees.

Utilities expense was $600 and all of it was paid.

Maintenance expense was $200, but it had been prepaid in January for the quarter.

Marketing expense was $450 and all of it was paid.

Rent expense was $6,000 and all of it was paid.

|| LISA’S ACCRUAL ACCOUNTING Cost of Food Sold Salaries and Wages oe PMainit enence LAURA’S CASH ACCOUNTING Marketing Net Profit or (Loss)

a. Which accounting method, Lisa’s accrual accounting or Laura’s cash accounting, shows a higher net profit?

b. Which accounting method shows the most accurate amount of money on hand to pay bills?

c. Which accounting method most accurately shows the revenues generated regardless of when they were received?

d. Which accounting method most accurately shows the expenses incurred regardless of when they were paid?

e. Which accounting method most accurately shows actual cash inflows and outflows?

f. Which accounting method shows the most accurate reflection of their restaurant’s true profitability?