Masters Consulting had the following selected transactions in October:
Requirements
	1. Show how each transaction would be handled (in terms of recognizing revenues and expenses) using the cash basis and the accrual basis. 2. Compute October income (loss) before tax under each accounting method. 3. Indicate which measure of net income or net loss is preferable. Use the transactions on October 11 and October 24 to explain.
Solution:
	Req. 1 & 2
	Masters Consulting
	Amount of Revenue (Expense) for October
	Date			Cash Basis		Accrual Basis
	Oct. 1	Insurance Expense		3900
	4	Expense		4500
	5	Revenue		1,000
	8	Expense		500
	11	Revenue
	19
	24	Revenue		3,200
	26	Expense		1900
	29	Expense		800
	31	Expense
	31	Revenue
	31	Expense		460
		Income (loss) before tax
	Req. 3

\begin{tabular}{rll} \hline October & 1 & Prepaid insurance for October through December, $3,900. \\ 4 & Purchased office furniture for cash, $4,500. \\ 5 & Performed services and received cash, $1,000. \\ 8 & Paid advertising expense, $500. \\ 11 & Performed service on account, $3,200. \\ 19 & Purchased computer on account, $1,900. \\ 24 & Collected for October 11 service. \\ 26 & Paid account payable from October 19. \\ 29 & Paid salary expense, $800. \\ 31 & Adjusted for October insurance expense (see October 1). \\ 31 & Earned revenue of $800 that was collected in advance back \\ 31 & in September. \\ \hline \end{tabular}