Question

Peaceful home provides​ house-sitting for people while they are away on vacation. Some of its customers pay immediately after the job is finished. Some customers ask that the business send them a bill. As of the end of the​ year, Stress minus Free has collected $ 600 from​ cash-paying customers. Stress minus Free​'s remaining customers owe the business $ 1 comma 300. How much service revenue would Stress minus Free have for the year under the a. cash​ basis? b. accrual​ basis?

Answer 1

a. 600$

b. 1,900 $

Step-by-step explanation:

Cash basis and accrual basis are two different accounting methods that are used to register transactions of revenues and expenses.

The main difference between them is how they report the company's revenues:

While Cash basis method only reports revenues when the payment is received, the accrual basis reports revenues when they are earned, no matter if the cash has been received or not.

In this case, at the end of the year, only 600 $ has actually been paid but there are 1,300$ more that have been earned but not yet received.

So, in this case, if we work with the Cash basis method, revenues are 600$ (only the money thatr has been received).

but, if we work with accrual basis method, revenues are the total amount earned during the period which is : 600$+ 1,300 $= 1,900$