QUESTION:

Total liabilities for a firm such as Home Depot are the same with cash basis accounting as with accrual-basis accounting.

o True

o False

Consider how shareholder contributions of $100,000 (to form the corporation) affect the following cash- and accrual-basis accounting equations, respectively: Assets/Resources Cash +$ 100.000 Cash-Basis Claims against Resources Contributed Capital Earned Capital +S 100.000 + Assets/Resources Cash Inventory Cash Inventory Cash Inventory Accrual-Basis Claims against Resources Liabilities Sharcholders' Equity Liabilities Contributed Capital + Earned Capital Accounts Payable Contributed Capital + Revenues Expenses + + + +$ 100.000 $ 100.000 a. b. Big idea here is that the corporation is a separate entity from the owners, and the entity now has $100.000 cash. So, this is a transaction with an owner, no revenue or expense (i.e., no proil), 10 non-owner transactions. c. Also, the cash or capital is of a contributed nature, meaning the shareholders contributed the cash. Thus, the shareholders maintain claims against the asscis or resources. d. Note that the transaction allects both equations in an identical fashion