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?

Question

Business

Jasmine Galloway

3 May, 04:01

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?

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Answers (1)

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Scarlett Mccann · Answer 1

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.