CASH BASIS Accounting ACCRUAL BASIS Accounting ACCRUAL vs CASH BASIS Accounting check mark the right box That fits description When are revenues earned? When are expenses earned? Which method uses Prepaid assets? Which method uses Unearned revenue? How is Income calculated? Which method complies with GAAP? Which method causes more fluctuations when reporting income? Which method reflects cash flow changes? Used by big corporations? Used by small service businesses? CASH Basis ACCRUAL Basis 500 SUO Income Statement for the month of August Provided services to a customer on account $12,000 Received $800 payment from customer for work done in July Sold services for cash $500 Purchased materials on account to be used for a job to be performed in August $2,000 Purchased materials for cash for a job to be performed in September $2,500 Paid for materials purchased and used in July, S1,500 Paid July utilities $250 NET INCOME