Comparing cash and accrual basic accounting and applying the revenue recognition principle and the matching principle

Sweet Catering completed the following selected transactions during May 2014:

May 1 Prepaid rent for three months, $1,500

5 Received and paid electricity bill, $400

9 Received cash for meals served to customers, $2,600

14 Paid cash for kitchen equipment, $2,400

23 Served banquet on account, $3,000

31 Made the adjusting entry for rent (from May1)

31 Accrued salary expense, $1,400

31 Recorded depreciation for May on kitchen equipment, $40

requirements

1. show whether each transaction would be handled as a revenue or an expense using both the cash basis and accrual basis accounting system by completing the following table. (expense should be shown in parenthesis.) also, indicate the amount of the revenue expense. the May 1 transaction has been completed as an example.

Amount of Revenue (expense) for May

date	cash basis amount of revenue (expense)	accrual basis amount of revenue (expense)
may 1	$(1,500)	$0

2. after completng the table, calculate the amount of net income or net loss for sweet catering under the accrual basis and cash basis accounting systems for May.

3. connsidering your results from requirement 2, which method gives the best picture of the true earnings of sweet catering? why?