Cash basis Accrual basis 2012 2013 2012 2013 Consulting fees Revenue 44,250 43,000 54,000 60,250 Expenses (30,000) (34,500) (15,000) (21,450) Profit 14,250 8,500 39,000 38,800
b) The accrual basis of accounting provides a better picture of a company's financial position at a moment or point in time. The reason is that all assets that were earned are reported and all liabilities that were incurred will be reported. So because of matching Principle in Accounting it would be better to use Accrual basis.
a) General Journal
Page xx
DATE
ACCOUNTS AND EXPLANATIONS
POST.
REF.
DEBIT
CREDIT
June
30
Salary expense
9,200
1)
Salary payable
9,200
For the salaries owed
June
30
Insurance expense
900
2)
Prepaid insurance
900
Expiration of insurance
June
30
Interest receivable
10,000
3)
Interest revenue
10,000
Accrued interest revenue
June
30
Unearned service revenue
4,600
4)
Service revenue
4,600
To record service revenue
June
30
Depreciation expense
16,000
5)
Accumulated depreciation
16,000
To record depreciation
June
30
Supplies expense
1,800
6)
Supplies
1,800
To record supplies used
June
30
Prepaid rent
1,350
7)
Cash
1,350
To record rent paid in advance
une
30
Advertising expense
900
8)
Advertising payable
900
To accrue advertising expense
44,750
44,750
b)
Unique Security Service
Income Statement
Month Ended 30 June 20XX
Revenue:
Service revenue
4,600 Interest revenue
10,000
Total revenue
14,600
Expenses:
Salary expense
9,200
Insurance expense
900
Depreciation expense
16,000
Supplies expense
1,800
Advertising expense
900
Total expenses
(28,800)
Loss
(14,200)
a)
Company name
Work Sheet
Month Ended xx June 20xx
ACCOUNT TITLE
TRIAL BALANCE
ADJUSTMENTS
ADJUSTED TRIAL BALANCE
INCOME STATEMENT
BALANCE SHEET
DEBIT
CREDIT
DEBIT
CREDIT
DEBIT
CREDIT
DEBIT
CREDIT
DEBIT
CREDIT
Cash at bank
13,640
400
2,120
1,280
10,640
10,640
Account receivable
11,800
11,800
11,800
Prepaid insurance
1,680
1,240
440
440
Land
69,200
69,200
69,200
Building
196,000
196,000
196,000
Accumulated Depreciation-Building
112,880
9,280
122,160
122,160
Equipment
20,120
20,120
20,120
Accumulated Depreciation-Equipment
8,800
3,240
12,040
12,040
Accounts Payable
16,040
16,040
16,040
Mortgage Payable
28,520
1,000
27,520
27,520
Salary Payable
0
2,360
2,360
2,360
Unearned Service Revenue
0
400
400
400
G. Cilic, Capital
103,840
103,840
103,840
G. Cilic, Drawing
127,360
127,360
127,360
Fees Earned
227,920
227,920
227,920
Rent Revenue
14,400
14,400
14,400
Salaries Expenses
63,600
2,360
65,960
65,960
Telephone Expenses
4,520
4,520
4,520
Interest Expenses
3,080
280
3,360
3,360
Insurance Expenses
1,400
1,240
2,640
2,640
Rates Expense
0
2,120
2,120
2,120
Depreciation Expense - Building
0
9,280
9,280
9,280
Depreciation Expense - Equipment
0
3,240
3,240
3,240
91,120
242,320
435,560
284,360
151200
151200
Net