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Accrual Basis of Accounting versus Cash Basis of AccountingOn December 31, Hermani Patterson completed his first year as a financial planner. Thefollowing data are available from his accounting recordsFees billed to clients for services rendered $97,700 Rent expense for year just ended $10,800Cash received from clientsSupplies purchased for cashSupplies used during the yearCash paid for rent (rent is paid throughFeb. of next year)85,000Utility expense incurred4,000Utility bills paid3,300 Salary earned by assistant30,000Salary paid to assistant27,00012,000a. Compute Hermani's net income for the year just ended using the accrual basis ofaccountinb. Compute Hermani's net income for the year just ended using the cash basis of accountingc. Which net income amount is computed in accordance with generally accepted accountingprinciples?Accrual

Question
Accrual Basis of Accounting versus Cash Basis of Accounting
On December 31, Hermani Patterson completed his first year as a financial planner. The
following data are available from his accounting records
Fees billed to clients for services rendered $97,700 Rent expense for year just ended $10,800
Cash received from clients
Supplies purchased for cash
Supplies used during the year
Cash paid for rent (rent is paid through
Feb. of next year)
85,000
Utility expense incurred
4,000
Utility bills paid
3,300 Salary earned by assistant
30,000
Salary paid to assistant
27,000
12,000
a. Compute Hermani's net income for the year just ended using the accrual basis of
accountin
b. Compute Hermani's net income for the year just ended using the cash basis of accounting
c. Which net income amount is computed in accordance with generally accepted accounting
principles?
Accrual
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Accrual Basis of Accounting versus Cash Basis of Accounting On December 31, Hermani Patterson completed his first year as a financial planner. The following data are available from his accounting records Fees billed to clients for services rendered $97,700 Rent expense for year just ended $10,800 Cash received from clients Supplies purchased for cash Supplies used during the year Cash paid for rent (rent is paid through Feb. of next year) 85,000 Utility expense incurred 4,000 Utility bills paid 3,300 Salary earned by assistant 30,000 Salary paid to assistant 27,000 12,000 a. Compute Hermani's net income for the year just ended using the accrual basis of accountin b. Compute Hermani's net income for the year just ended using the cash basis of accounting c. Which net income amount is computed in accordance with generally accepted accounting principles? Accrual

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Step 1

Under Part-1, when net income as to be computed for accrual basis, then the fees earned for serices performed is taken in to considered irrespective of actually received or not. The total expenses actually incurred to used to earn that revenue shall be taken in to account.

hence, the net income under accrual basis has been computed as above.

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Step 2

Part -2, when net income has to be computed as per cash basis, the revenues and expenses actualle received or paid shall be taken in to consideration for computing the net income.

The same has been computed as above.

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Step 3

Part-3 As per generally accepted accounting principles, the ACCRUAL me...

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