EXERCISES E3.1 Determine cash-basis and accrual-basis revenue. LO1 In its first year of operations, Tang Pty Ltd generated $78 000 for services provided, $12 000 of which was on account and still outstanding at year-end. The remaining $66000 was received in cash from customers. The company incurred operating expenses of $45 000. Of these expenses, $40 500 were paid in cash; $4500 was still on account at year-end. In addition, Tang Pty Ltd prepaid $6500 for insurance coverage that would not commence until the second year of operations. Required (a) Calculate the first year's profit under the cash basis of accounting, and calculate the first year's profit under the accrual basis of accounting (b) Which basis of accounting (cash or accrual) provides more useful information for decision makers? E3.2 Identify accounting concepts, principles, criteria and constraints. LO2 These are the concepts, principles, criteria and constraints discussed in this and previous chapters: 1. Accounting entity concept. 2. Accounting period concept. 3. Cost principle. 4. Expense recognition criteria. 5. Full disclosure principle. 6. Going concern principle. 7. Materiality. 8. Monetary principle. 9. Revenue recognition criteria