Reference no: EM132696194

Question - Aramis is a partner in a large dental practice which uses the accruals basis. Aramis sees several patients on 30 June CIY and gives them invoices dated 30 June CIY. The payment term for the invoices is 14 days.

1. Which of the following statements is CORRECT in relation to the derivation of fee income?

The practice will account for the income on 30 June 2014, as this is when the services were rendered and the invoice was raised.

The practice will account for the income on 14 July 2014, as this is when the payment is due.

The practice will account for each invoice on the date it is paid by the customer.

The partnership can choose to use either the cash or accruals basis to achieve the most favourable tax outcome.

2. Which of the following is NOT assessable on a receipts basis?

Interest derived on an investment held by a major bank.

Interest derived by an individual on a savings account.

Services income of a sole trader.

Income received in advance with no obligation for refund.

3. Your accounting firm has just launched a new technical bulletin service for its clients, called Tax Word. Clients pay $150 for a year's subscription to the service, which is a monthly bulletin outlining any tax issues of interest to clients. Clients are free to cancel their subscription at any time, and will receive a refund of the unused portion of their subscription.

There are six clients who have signed up and paid for the subscription for the one-year period of 1 June to 31 May the following year.

The firm uses an accruals basis of accounting. How much revenue is included in its CIY income tax return in relation to the subscription monies received?

$900

$825

$74

$0