Case 8

CASH VERSUS ACCRUAL BASIS

by Vic Stanton

You are trying to get a loan from a bank. The bank requests financial statements on the accrual basis of accounting. The only data you have available is your checkbook records.

CHECK#

DATE

DESCRIPTION

PAYMENT

DEPOSIT

END BAL.

 
 
 
1-Jan
 
Orig. Investment
 
 
 
20,000
 
  20,000
 
101
 
1-Jan
 
Taylor Management
 
3,000
 
 
 
17,000
 
102
 
8-Jan
 
Turner Supplies
 
1,000
 
 
 
16,000
 
103
 
10-Jan
 
James Utilities
 
500
 
 
 
15,500
 
 
 
12-Jan
 
Deposit ABC Co.
 
 
 
2,000 
  17,500
 
104
 
15-Jan
 
Peck Corporation
 
4,000
 
 
 
13,500
 
105
 
17-Jan
 
Car Insurance Co.
 
450
 
 
 
13,050
 
106
 
20-Jan
 
Peck Corporation
 
1,250
 
 
 
11,800
 
 
 
22-Jan
 
Deposit XYZ Co.
 
 
 
2,000 
  13,800
 
 
 
31-Jan
 
 
Bank Service Charge
 
 
50
 
 
 
   13,750
 
    
Description of transactions:                                 
        1-Jan   Started my business with a $10,000 loan and invested $10,000.                                
        1-Jan   Paid six months rent in January.                                     
        8-Jan   Purchased office supplies.                                   
        10-Jan  Deposit paid for utilities.                                  
        12-Jan  Deposit received $2,000 for my products to be shipped in February.                            
        15-Jan  Purchased goods to be shipped February 2000.                                
        17-Jan  Paid three months car insurance.                                     
        20-Jan  Paid for the goods needed to sell 125 units.                                
        22-Jan  Sold 125 units.                               
        31-Jan  Bank charged me $35 for checks and a $15 service fee.                         
  

INSTRUCTIONS: PREPARE A BALANCE SHEET ON THE CASH AND THE ACCRUAL BASIS OF ACCOUNTING..