Question

What will be the difference in treatment of the following items under the cash system and mercantile system? Show the approach clearly.
a. A sale is made for Rs. 50,000 on credit b. A sale is made for Rs.20,000 against cash c. Payment of Rs.30,000 is received against sale under (a) d. Committed to a consultancy expenditure of Rs. 75,000. e. Paid Rs. 50,000 for the consultancy under (d)

Answer 1

Explanation:

In cash system we enter the transaction only after we receive or pay cash

but in mercantile system the transaction is done when we realize it even though we receive cash or not