Question

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, Peaceful Home has collected $ 1,000 from​ cash-paying customers. Peaceful Home ​'s remaining customers owe the business $ 1,400 . How much service revenue would Peaceful Home have for the year under the a. cash​ basis? b. accrual​ basis?

Answer 1

Answer:

a. $1,000 will be recognized as service revenue using the cash basis.

b.  $2,400 ($1000 plus $1400) will be recognized as service revenue using the accrual basis.

Explanation:

Given that as of the end of the​ year, Peaceful Home has collected $ 1,000 from​ cash-paying customers while Peaceful Home ​'s remaining customers owe the business $ 1,400.

Revenue to be recognized using;

• Cash basis

$1,000 will be recognized as service revenue using the cash basis.

• Accrual basis

On accrual basis, revenue is recognized when the service has been provided irrespective of whether cash has been collected or not.

A total of $2,400 ($1000 plus $1400) will be recognized as service revenue using the accrual basis.