Financial Accounting: Problem Sets

Week 4 Checkpoint
March 17, 2013
XACC/290

Resource: Ch. 4 of Financial Accounting

Complete Exercise BE4-1.

Complete Problems 4-2A & 4-3A.

BE4-1:

|Cash |Net Income |
|-$100 |$0 |
|-$20 |$0 |
|+$1,300 |$1,300 |
|+$800 |$800 |
|-$2,500 |$0 |
|-$600 |$0 |
| | |
| |$2,100.00 |
| | |

4-2A:

Jun 30, 2012 |Debit |Credit | | |$ |$ | |Cash |6,850 | | |Accounts Receivable |7,000 | | |Prepaid Insurance |2,880 | | |Supplies |2,000 | | | | |720 | |Equipment |2,000 | | | | |250 | |Accounts Payable | |4,230 | |Unearned Service Revenue |4,100 |5,200 | |Common Stock | |22,000 | |Service Revenue |3,900 |8,300 | |Salaries and Wages Expense |4,000 |1,250 | |Rent Expense |2,000 | | | | | | | |34,730 |41950 | |

4-3A:

May 31, 2012 |Debit |Credit |Total Net Income | | |$ |$ | | |Cash |2,500 | | | | | | | | |Prepaid Insurance |1,800 | | | | | |-450 | | |Supplies |2,600 | | | | | | +1,050 | | |Land |15,000 | | | |Buildings |70,000 | | | | | |-3,600 | | |Equipment |16,800 | | | | | |-3,000 | | |Accounts Payable | |4,700 | | |Unearned Rent Revenue | |3,300 | | | | | | | |Mortgage Payable | |36,000 | | |Common Stock | |60,000 | | |Rent Revenue | |9,000 | | | | | +2,500 | | |Salaries and Wages Expense |3,000 | | | | | | +900 | | |Utilities Expense |800 | | | |Advertising Expense |500 | | | | | | | | |Total: |113,000 |105950 |-7,050 | |

Answer the following:

Commercial accounting and generally accepted accounting principles, generally prescribe the accrual basis of accounting over the cash basis. Describe both bases of accounting and explain the differences.

Both accrual basis and cash basis have