Anne Marie, the owner of Annes 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 months 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 havent 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 thats a liability. That doesnt make any sense to me? Please explain. 3. In December I did 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?

Anne's Beauty Salon, Inc Balance Sheet At December 31, 2015 Liabilities Current Liabilities Assets Current Assets Cash Accounts Receivable Supplies Prepaid Rent Prepaid Insurance Total Current Assets Equipment Less: Accumulated Depreciatio Total Long-Term Assets $ 5,000.00 $200.00 $ 5,200.00 949.50 Accounts Payable $11,948.00 Unearned Revenue $20,500.00 Total Current Liabilities $8,400.00 $ 6,000.00 $ 47,797.50 Note Payable $ 15,000.00 $ 20,200.00 $ 25,000.00 Total Liabilities (5,000.00)$20,000.00 Stockholders' Equity $20,000.00 Common Stock $ 30,000.00 17,597.50 $ 67,797.50 Total Liabilities and Stockholders' Equi $ 67,797.50 Retained Earnings Total Assets