Given the following transaction what income would be reporte

Given the following transaction, what income would be reported (a) on the cash basis and (b) on the accrual basis? Credit sales to customers totaled $36,000 Cash sales totaled $105,000. Cash collections on account from customers totaled $33,000. Cost of goods sold during the period was $79,000 Payments made to supplies of inventory totaled S75,000 - - Wages of $23,000 were paid during the year. In addition, wages of S1,000 remained unpaid at year end; there were no wages unpaid at the beginning of the year.

Solution

Calculate income under cash basis of accural basis :

	Cash Basis	Accural basis
Sales	138000	141000
Less: Cost of goods sold/Payment for inventory	(75000)	(79000)
Less: Wages	(23000)	(24000)
Net income	40000	38000