Question 2 : (There are 3 Part of this question)

Cash versus Accrual Basis of Accounting

At the end of the first year of operations, Jeremy Pereira, owner of Jubilee Designs, engaged you to prepare yearly financial statements for the year ended 30 June 2020, on both the cash basis and the accrual basis. The following data are a summary of selected transactions that occurred during the year. Ignore GST.

1.Fees of $325,000 were collected for services provided during the year.

2.There were $8,000 in accounts receivable at 30 June 2019 for services performed during June on credit.

3.Cash paid for salaries, rent, insurance and other expenses $195,000 during the year.

4.Salaries accrued for last fortnight of June $10,000, but not yet paid.

5.On 25 June 2020, a client paid $3,000 in advance for services to be rendered during July 2020.

6.Expenses of $9,000 were paid in advance for next financial year (not included in the above $195,000) at 30 June.