Answer:
Hybrid basis
Step-by-step explanation:
There are different methods of accounting used by businesses depending on their peculiar needs. Below are the type of accounting methods:
- Cash basis is when revenues and expenses are recognised when cash is recieved or paid out.
-Accrual basis is when revenue and expenses are recognised when they are earned. For example if services are rendered to a client that will pay in a week's time, since service has already been given it is considered that the future payment has been earned.
- Modified basis combines elements of cash and accrual basis. For example considering short term assets like accounts receivable and accounts payable as cash items. Long term assets are recorded on accrual basis.
- Hybrid basis is used when cash and accrual methods are used for various expenses and tax. Mostly it is used for internal accounting purposes.
In this scenario Hariette would like to review the income and expenses that were actually paid last month. This requires a cash basis that shows actual amount recieved and paid last month. Account receivable and payable are not considered.
In setting aside money for tax she will employ accrual basis accounting. It is an expense that is estimated for future use.
So the hybrid basis is the method that will be most suitable.
