Anne Marie, the owner of Anne's Beauty Salon, comes to see you again.She tells you that she just got her year-end set of financial statements from her accountant and is more confused.Here are her questions.

1.I have very little cash and yet he says that I had a good year with $15,000 net income.He said it was because we use accrual accounting (whatever that means).I know I paid 6 month's rent ($1,400 a month) in advance at the end of the year.I also paid my insurance for the next year.Insurance cost $6,000.I have several customers who had a lot of services done on credit and haven't paid yet.I think that totals $11,948 owed to me.Can you explain?

2.I was paid $200 in advance for some hair coloring I will do in January.He tells me that's a liability.That doesn't make any sense to me?Please explain.

3.In December I did several hair several haircuts during the last week of the year and sent bills to all the customers?When is that counted?

How would you answer these questions?