Healthy Hearts Consulting had the following selected transactions in October: (C

Question

Healthy Hearts Consulting had the following selected transactions in October: (Click the icon to view the transactions.) Read the requirements Requirement 1. Show how each transaction would be handled using the cash basis and the accrual basis. Under each column, give the amount of revenue or expense for October using the cash basis and the accrual basis. (Enter "0" for any transactions that do not affect revenues expenses or losses. Round your answers to the nearest whole dollar.) More Info Amount of Revenue (Expense) for October Cash Basis Accrual Basis Date Revenue or (Expense) Revenue or (Expense) October 1 4 5 Prepaid insurance for October through December, $3,000 Purchased office furniture for cash, $4,000 ober Performed services and received cash, $1,600 8 Paid advertising expense, $100 11 Performed service on account, $2,700 19 Purchased computer on account, $1,800 24 Collected for October 11 service 26 Paid account payable from October 19 29 Paid salary expense, $1,000 31 Adjusted for October insurance expense (see October 1). 31 Earned revenue of $800 that was collected in advance back 19 24 26 29 31 31 31 in September Recorded October depreciation expense on all fixed assets $108 31 Print Done

Explanation / Answer

under cash basis ,revenue and expense is receognised when cash is received or paid whereas under accrual basis ,revenue and expense is reconised when revenue is earned or expense is incurred.

Cash basis

Revenue/(expense)

Accrual basis

Revenue /(expense)

Cash basis

Revenue/(expense)

Accrual basis

Revenue /(expense)

1 (3000) ,since cash is paid will be recognised in the month it is incurred 4 (4000) capital expenditure 5 1600 1600 8 (100) (100) 11 will be recognised when cash is received 2700 19 capital expenditure capital expenditure 24 2700 already recognised 26 (1800) NA 29 (1000) (1000) 31 Already recognised (1000)     [3000/3=$1000 per month for october) 31 aready recognised in september when cash is received 800 31 NA,since depreciation is non cash (108) Total (5600) 2892

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