Sarah Bates uses the cash receipts method of accounting for her accounting busin

Question

Sarah Bates uses the cash receipts method of accounting for her accounting business. On December 28, 2015, she received a $1,480 check in payment for her services. The following year she was told that the check had bounced. One client offered to give her a check for $700 on December 31, 2015, but Sarah asked him to give it to her the next year, which the client did. Another client gave her a check for $950 on December 30, 2015, but after the bank had closed. Both the $700 and $950 checks cleared the next year.

Explanation / Answer

Cash Based accounting is based on when the checks have been received Hence in the given question , the folowing will be included in 2015 revenue Check received December 2015 1480 ( bounced in 2016) Check received on December 30,2015 900 Total revenue to be reported in 2015 2380 The check for $ 700 , will not be reported as income as it was not received by Sarah in December

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