(Classify the effect of economic events on income on the cash and accrual bases, LO 3, 6) Indicate whether each of the following events would be included in a calculation of net income on the cash basis, the accrual basis, or both:

Transcribed Image Text:

Economic Event Example: An entity sells merchandise for cash. a. An entity receives a deposit from a customer for services that will be provided in the future. b. An entity provides services to a customer in the current period who paid in a previous period. c. An advance is paid to an employee for work she will do in the future. d. Supplies that were paid for in a previous period are used in the current period to provide services to a customer. e. Supplies are bought, paid for, and used in the current period to provide services to a customer. Net income on the cash basis Yes Net income on the accrual basis Yes