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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881
BuyFind

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
Publisher: Cengage Learning
ISBN: 9781337690881

Solutions

Chapter
Section
Chapter 3, Problem 1DQ
Textbook Problem

How does accural-basis net income differ from cash-basis net income?

Expert Solution
To determine

Concept Introduction:

Accounting is an art of recording, classifying, analyzing and summarizing the financial statement to produce meaningful information and reports.

Accounting is done with two methods as follows:

Cash Basis accounting: Under the cash basis accounting all the cash receipts for the period are considered as revenue and all the cash payments for the period are considered as expenses and net income us calculated.

Accrual Basis accounting: Under the accrual basis, the revenue and expenses are recorded accreting to their accrual for the given period and cash receipts and payments are not considered to decide their accrual. The net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.

To indicate:

The difference between the Cash basis net income and accrual basis net income.

Answer to Problem 1DQ

The difference between the Cash basis net income and accrual basis net income is as follows:

Under the cash basis accounting the net income is calculated using cash receipts and cash payments whereas under the accrual basis of accounting, the net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.

Explanation of Solution

Accounting is an art of recording, classifying, analyzing and summarizing the financial statement to produce meaningful information and reports.

Accounting is done with two methods as follows:

Cash Basis accounting: Under the cash basis accounting all the cash receipts for the period are considered as revenue and all the cash payments for the period are considered as expenses and net income us calculated.

Accrual Basis accounting: Under the accrual basis, the revenue and expenses are recorded accreting to their accrual for the given period and cash receipts and payments are not considered to decide their accrual. The net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.

The difference between the Cash basis net income and accrual basis net income is as follows:

Under the cash basis accounting the net income is calculated using cash receipts and cash payments whereas under the accrual basis of accounting, the net income is calculated using the accrued revenue and accrued expenses belonging to the particular period.

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Chapter 3 Solutions

Cornerstones of Financial Accounting
Ch. 3 - How is the amount for an interest expense (or...Ch. 3 - Describe the effect on the financial statements...Ch. 3 - On the basis of what you have learned about...Ch. 3 - What is the purpose of closing entries?Ch. 3 - Describe the four steps in the closing process.Ch. 3 - Identify each of the following categories of...Ch. 3 - Why are only the balance sheet accounts permanent?Ch. 3 - List the seven steps in the accounting cycle in...Ch. 3 - ( Appendix 3A) What is the relationship between...Ch. 3 - ( Appendix 3A) Describe the structure of the...Ch. 3 - Which of the following statements is true? Under...Ch. 3 - In December 2019, Swanstrom Inc. receives a cash...Ch. 3 - Which transaction would require adjustment at...Ch. 3 - Which of the following statements is false?...Ch. 3 - Dallas Company loaned to Ewing Company on December...Ch. 3 - Rons Diner received the following bills for...Ch. 3 - In September 2019, GolfWorld Magazine obtained...Ch. 3 - Hurd Inc. prepays rent every 3 months on March 1,...Ch. 3 - Which of the following statements is incorrect...Ch. 3 - Reinhardt Company reported revenues of $122,000...Ch. 3 - Which of the following is true regarding the...Ch. 3 - Cornerstone Exercise 3-12 Accrual- and Cash-Basis...Ch. 3 - Cornerstone Exercise 3-13 Accrual- and Cash-Basis...Ch. 3 - Cornerstone Exercise 3-14 Revenue Recognition...Ch. 3 - Cornerstone Exercise 3-15 Expense Recognition (or...Ch. 3 - Cornerstone Exercise 3-16 Identification of...Ch. 3 - Cornerstone Exercise 3-17 Accrued Revenue...Ch. 3 - Cornerstone Exercise 3-18 Accrued Expense...Ch. 3 - Cornerstone Exercise 3-19 Deferred Revenue...Ch. 3 - Cornerstone Exercise 3-20 Deferred Expense...Ch. 3 - Cornerstone Exercise 3-21 Adjustment for Supplies...Ch. 3 - Cornerstone Exercise 3-22 Adjustment for...Ch. 3 - Cornerstone Exercise 3-23 Financial Statement...Ch. 3 - Cornerstone Exercise 3-24 Preparing an Income...Ch. 3 - Cornerstone Exercise 3-25 Preparing a Retained...Ch. 3 - Cornerstone Exercise 3-26 Preparing a Balance...Ch. 3 - Cornerstone Exercise 3-27 Preparing and Analyzing...Ch. 3 - Brief Exercise 3-28 Accrual- and Cash-Basis...Ch. 3 - Brief Exercise 3-29 Revenue and Expense...Ch. 3 - Brief Exercise 3-30 Identification of Adjusting...Ch. 3 - Brief Exercise 3-31 Adjusting Entries-Accruals...Ch. 3 - Brief Exercise 3-32 Adjusting Entries-Deferrals...Ch. 3 - Brief Exercise 3-33 Preparing an Income Statement...Ch. 3 - Brief Exercise 3-34 Preparing a Retained Earnings...Ch. 3 - Brief Exercise 3-35 Classifying Balance Sheet...Ch. 3 - Brief Exercise 3-36 Preparing and Analyzing...Ch. 3 - Brief Exercise 3-37 The Accounting Cycle Below are...Ch. 3 - Exercise 3-38 Accrual- and Cash-Basis Expense...Ch. 3 - Exercise 3-39 Revenue Recognition Each of the...Ch. 3 - Exercise 3-40 Revenue and Expense Recognition...Ch. 3 - Exercise 3-41 Cash-Basis and Accrual-Basis...Ch. 3 - Exercise 3-42 Revenue and Expense Recognition...Ch. 3 - Exercise 3-43 Recognizing Expenses Treadway Dental...Ch. 3 - Exercise 3-44 Revenue Expense and Recognition...Ch. 3 - Exercise 3-45 Identification of Adjusting Entries...Ch. 3 - Exercise 3-46 Identification and Analysis of...Ch. 3 - Exercise 3-47 Revenue Adjustments Sentry Transport...Ch. 3 - Expense Adjustments Faraday Electronic Service...Ch. 3 - Exercise 3-49 Prepayments, Collections in Advance...Ch. 3 - Exercise 3-50 Prepayment of Expenses JDM Inc. made...Ch. 3 - Exercise 3-51 Adjustment for Supplies The downtown...Ch. 3 - Adjusting Entries Exercise 3-52 Allentown Services...Ch. 3 - Exercise 3-53 Adjusting Entries Reynolds Computer...Ch. 3 - Exercise 3-54 Recreating Adjusting Entries...Ch. 3 - Exercise 3-55 Effect of Adjustments on the...Ch. 3 - Exercise 3-56 Preparing an Income Statement Oxmoor...Ch. 3 - Exercise 3-57 Preparing a Retained Earnings...Ch. 3 - Exercise 3-58 Preparing a Balance Sheet Refer to...Ch. 3 - Exercise 3-59 Preparation of Closing Entries Grand...Ch. 3 - Exercise 3-60 Preparation of Closing Entries James...Ch. 3 - Exercise 3-61 Preparation of a Worksheet (Appendix...Ch. 3 - Problem 3-62A Cash-Basis and Accrual-Basis Income...Ch. 3 - Problem 3-63A Revenue and Expense Recognition...Ch. 3 - Problem 3-64A Identification and Preparation of...Ch. 3 - Problem 3-65A Preparation of Adjusting Entries...Ch. 3 - Problem 3-66A Effects of Adjusting Entries on the...Ch. 3 - Problem 3-67A Adjusting Entries and Financial...Ch. 3 - Problem 3-68A Inferring Adjusting Entries from...Ch. 3 - Problem 3-69A Preparation of Closing Entries and...Ch. 3 - Problem 3-70B Comprehensive Problem: Reviewing the...Ch. 3 - Problem 3-71 A Preparing a Worksheet (Appendix 3A)...Ch. 3 - Problem 3-62B Cash-Basis and Accrual-Basis Income...Ch. 3 - Problem 3-63B Revenue and Expense Recognition Aunt...Ch. 3 - Problem 3-64B Identification and Preparation of...Ch. 3 - Problem 3-65B Preparation of Adjusting Entries...Ch. 3 - Problem 3-66A Effects of Adjusting Entries on the...Ch. 3 - Problem 3-67B Adjusting Entries and Financial...Ch. 3 - Problem 3-68B Inferring Adjusting Entries from...Ch. 3 - Problem 3-69B Preparation of Closing Entries and...Ch. 3 - Problem 3-70B Comprehensive Problem: Reviewing the...Ch. 3 - Problem 3-71B Preparing a Worksheet (Appendix 3A)...Ch. 3 - Case 3-72 Cash- or Accrual-Basis Accounting Karen...Ch. 3 - Case 3-73 Recognition of Service Contract Revenue...Ch. 3 - Case 3-73 Recognition of Service Contract Revenue...Ch. 3 - Case 3-73 Recognition of Service Contract Revenue...Ch. 3 - Case 3-74 Revenue Recognition Melaney Parks...Ch. 3 - Case 3-74 Revenue Recognition Melaney Parks...Ch. 3 - Case 3-75 Applying the Expense Recognition...Ch. 3 - case 3-76 Adjusting Entries for Motion Picture...Ch. 3 - Case 3-77 Effect of Adjusting Entries on Financial...Ch. 3 - Case 3-77 Effect of Adjusting Entries on Financial...Ch. 3 - Case 3-78 Interpreting Closing Entries Barnes...Ch. 3 - Case 3-78 Interpreting Closing Entries Barnes...Ch. 3 - Case 3-78 Interpreting Closing Entries Barnes...Ch. 3 - Case 3-79 Research and Analysis Using the Annual...Ch. 3 - Case 3-79 Research and Analysis Using the Annual...Ch. 3 - Case 3-79 Research and Analysis Using the Annual...Ch. 3 - Case 3-79 Research and Analysis Using the Annual...Ch. 3 - Case 3-79 Research and Analysis Using the Annual...Ch. 3 - Case 3-80 Comparative Analysis: Under Armour,...Ch. 3 - Refer to the 10-K reports of Under Armour, Inc.,...Ch. 3 - Case 3-80 Comparative Analysis: Under Armour,...Ch. 3 - Case 3-80 Comparative Analysis: Under Armour,...Ch. 3 - Case 3-81 CONTINUING PROBLEM: FRONT ROW...Ch. 3 - Case 3-81 CONTINUING PROBLEM: FRONT ROW...Ch. 3 - Case 3-81 CONTINUING PROBLEM: FRONT ROW...Ch. 3 - Case 3-81 CONTINUING PROBLEM: FRONT ROW...Ch. 3 - Case 3-81 CONTINUING PROBLEM: FRONT ROW...Ch. 3 - Case 3-81 CONTINUING PROBLEM: FRONT ROW...Ch. 3 - Case 3-81 CONTINUING PROBLEM: FRONT ROW...

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