Question
Cuisine Cuisine Catering completed the following selected transactions during May May, 2016 2016: LOADING... (Click the icon to view thetransactions.) Read the requirementsLOADING... . Requirement
Cuisine
Cuisine Catering completed the following selected transactions during May
May, 2016
2016:
LOADING...
(Click the icon to view thetransactions.)
Read the requirementsLOADING...
.
Requirement 1. Show whether each transaction would be handled as a revenue or an expense using both the cash basis and accrual basis accounting systems by completing the table provided.(Expenses should be shown inparentheses.) Also indicate the dollar amount of the revenue or expense. The May
May 1 transaction has been completed as an example. (Enter "0" for any transactions that do not affect revenues orexpenses.)
Amount of Revenue (Expense) for May
Cash Basis Amount
Accrual Basis Amount
Date
of Revenue (Expense)
of Revenue (Expense)
May 1
$
(2,700)
$
0
May 5
900
May 9
2000
May 14
4200
May 23
3300
May 31
rent
900
May 31
salary
1000
May 31
depr
70
Requirement 2. After completing thetable, calculate the amount of net income or net loss for Cuisine
Cuisine Catering under the accrual basis and cash basis accounting systems for May
May. (Use parentheses or a minus sign to indicate aloss.)
Cash Basis Amount
Accrual Basis Amount
Net income (loss)
Requirement 3. Considering your results from Requirement2, which method gives the best picture of the true earnings of Cuisine
Cuisine Catering? Why?
The
accrual basis
cash basis
gives the best picture of the true earnings of Cuisine
Cuisine Catering because revenues are recorded when
earned
paid
and expenses are recorded when
incurred
paid
, as dictated by the revenue recognition principle and the matching principle.
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