Total spa services earned $ 135 comma 000 of service revenue during 2018. of the $ 135 comma 000 earned, the business received $ 111 comma 000 in cash. the remaining amount, $ 24 comma 000, was still owed by customers as of december 31. in addition, total spa services incurred $ 80 comma 000 of expenses during the year. as of december 31, $ 16 comma 000 of the expenses still needed to be paid. in addition, total spa services prepaid $ 7 comma 000 cash in december 2018 for expenses incurred during the next year. 1. determine the amount of service revenue and expenses for 2018 using a cash basis accounting system. 2. determine the amount of service revenue and expenses for 2018 using an accrual basis accounting system.

1. Determine the amount of service revenue and expenses for 2018 using a cash basis accounting system.

2. Determine the amount of service revenue and expenses for 2018 using an accrual basis accounting system.

                  Cash BasicAccrual basic

Service revenue111000135000

Expense                  2300080000

Explanation:

The difference between cash and accrual accounting lies in the timing of when sales and purchases are recorded in your accounts. Cash accounting recognizes revenue and expenses only when money changes hands, but accrual accounting recognizes revenue when it’s earned, and expenses when they’re billed (but not paid).

Spa services earned135000  

                                  111000Cash

                                  24000Account receivable

Services  

Expense80000Account Payable

         16000Cash

Expense7000Prepaid Cash

                  Cash BasicAccrual basic

Service revenue111000135000

Expense                  2300080000

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