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Explain the accrual basis of accounting

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Question - Mr. Sam established Airplane agency The following transactions were completed during the month of January 2019.

1. Mr. Sam invested SR 120,000 cash to the business.

2. The company paid SR 85,000 as office rent (expenses).

3. The company purchased furniture worth of SR 50,500 by cash.

4. Bank loan obtained for business is SR 13,000.

5. The company gave services to the customer and received SR 95,000 as cash income.

6. Utility expense SR 17,500 were paid by the company.

The ledger accounts need to be prepared are: Capital account, Cash account, Office rent expenses account, furniture account, bank loan account, income account and utility expenses account. Prepare the trail balance.

Explain the accrual basis of accounting and the reasons for adjusting entries and compare Accrual- versus Cash-Basis Accounting.

Reference no: EM132902448

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