Prepare an income statement

Assignment Help Accounting Basics

Reference no: EM13903960

TamaraNice set up a secretarial services business (TN Services) on 1 July 2013. Usually, Tamara collects $20 per hour for services provided on the completion of each day's work and pays for the maintenance of her computer equipment with cash. Tamara did an accounting subject at secondary school and so has kept her own accrual-based accounting records. At the end of the first year, Tamara produced the following unadjusted trial balance:

TN Services

Unadjusted Trial Balance

As at 30^th June 2013

Cash at Bank	$2,550
Accounts Receivable	40
Computer Equipment	3,000
Motor Vehicle	24,000
TamaraNice, Capital		$19,000
TamaraNice, Drawings	17,570
Income		38,400
Telephone Expense	2,300
Supplies Expense	4,840
Repairs & Maintenance	2,560
Other Expenses	540

The following adjustments were required at the year-end:

1. Supplies on hand at year-end, $230

2. An account was received for repairs done to Tamara's computer equipment before year-end but not recorded, $270.

All calculations must be shown. Solutions provided without calculations will not receive marks. Ignore the GST in your answers.

Required:

a) Prepare an income statement for the year ended 30^th June 2013 using accrual accounting.

b) Prepare an income statement for the year ended 30^th June 2013 using cash accounting.

c) Tamara was not sure whether she could use cash accounting rather than accrual accounting for her business records. From the information provided, decide whether Tamara should use accrual or cash accounting, and explain to her the reasons for your decision.

Reference no: EM13903960

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