Q. 3-2SE-a - Horngren'S Financial And Managerial Accounting

Question

Protection Home provides house-sitting for people while they are away on vacation. Some of its customers pay immediately after the job is finished. Some customers ask that the business send them a bill. As of the end of the year, Protection Home has collected \(900 from cash-paying customers. Protection Home’s remaining customers owe the business \)1,300. How much service revenue would Protection Home have for the year under the a. cash basis? b. accrual basis?

Step-by-Step Solution

Answer

Service revenue equals $900. 

Explanation on Cash Basis Accounting

Under this method, revenues and expenses are recorded on the basis of cash receipts and payments.

Explanation on Service Revenue

In the given case, company has received $900 from the customers, hence $900 will be recorded as service revenue under cash basis accounting.