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An example on Consulting Fees Revenue

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RUNNING HEAD: ACCT20052 T1 2014 Assessment
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ACCT20052 T1 2014 Assessment
Question 1
a) Using the above data, complete abbreviated income statements in the form shown below
for the years 2012 and 2013 for both the cash basis and accrual basis of accounting.
Show supporting calculations in good form.
Cash Basis
Consulting Fees Revenue
In the cash basis, the revenue is recognized when cash is received at the point where sale is
made.
The sum of revenue is calculated as;
Cash Collected for services offered in the year + Cash collected for services offered in previous
years + Prepaid revenue collected within the year
2012 Revenue = $42,000 + $2,250 = $44,250
2013 Revenue= $43,000 + $12,000 = $55,000
Expenses
Under cash basis, the expenses are recognized when cash is paid out for them regardless of when
they are incurred
2012= $24,000 + $6,000 + $4,500 = $34,500
2013= $25,500 + $10,500 + $9000 + $10,500= $55,500
Accrual Basis
Consulting Fee Revenue
Under accrual basis, revenue is recognized when it is earned regardless of the status of payment
i.e. cash and debt sales are all recognized.

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RUNNING HEAD: ACCT20052 T1 2014 Assessment Name Instructor Institution Date ACCT20052 T1 2014 Assessment Question 1 a) Using the above data, complete abbreviated income statements in the form shown below for the years 2012 and 2013 for both the cash basis and accrual basis of accounting. Show supporting calculations in good form. Cash Basis Consulting Fees Revenue In the cash basis, the revenue is recognized when cash is received at the point where sale is made. The sum of revenue is calculated as; Cash Collected for services offered in the year + Cash collected for services offered in previous years + Prepaid revenue collected within the year 2012 Revenue = $42,000 + $2,250 = $44,250 2013 Revenue= $43,000 + $12,000 = $55,000 Expenses Under cash basis, the expenses are recognized when cash is paid out for them regardless of when they are incurred 2012= $24,000 + $6,000 + $4,500 = $34,500 2013= $25,500 + $10,500 + $9000 + $10,500= $55,500 Accrual Basis Consulting Fee Revenue Under accrual basis, revenue is recognized when it is earned regardless of the status of payment i.e. cash and debt sales are all recognized. ACCT20052 T1 2014 Assessment 2012= $42,000 + $12,000 = $54,000 2013= $43,000 + $15,000 +$2,250 = $60,250 Expenses The expenses are recognized when they occur. This might be a period different from that in which they are paid. 2012= $24,000 + 10,500 + $6000= $40,500 2013= $25,500 + $10,950 + $9000 + $4,500= $49,950 Cash basis Accrual basis 2012 2013 2012 20 ...
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