Question

During the financial year 2018-19,Aman had cash sales of 490000 and credit sales 150000.His expenses for the year were 350000 out of which 80000is still to be paid. Find Aman's income for the year ,following Cash and Accrual Basis of Accounting

Answer 1

Answer:

Aman's income according to cash basis of accounting will be:

Income=Cash sales - Expenses

=490000-270000(350000-80000)

=220000

According to accrual or mercantile basis of accounting:

Income=(cash sales+credit sales)- total expenses

=640000-350000=290000

Explanation:

In cash basis of accounting credit sales and outstanding expenses are not accounted.