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home / study / business / accounting / questions and answers / total paint services earned $110,000 of service ... Question Total Paint Services earned $110,000 of service revenue during 2014. Of the $110,000 earned, the business received $84,000 in cash. The remaining amount, $26,000, was still owed by customers as of December 31. In addition, Total Paint Services incurred $82,000 of expenses during the year. As of December 31, $6,000 of the expenses still needed to be paid. In additional, Total Paint Services prepaid $2,000 cash in December 2014 for expenses incurred during the next year. 1. Determine the amount of service revenue and expenses for 2014 using an accrual basis accounting system
Explanation / Answer
Amount of service revenue is $ 110,000
Amount of expenses for the year is $ 82,000
under acrual basis of accounting, revenue are booked when they earned and there is no uncertainty of ultimate collection of the amount.
Furter, once expenses are incurred they are accounted for under accrual base of accounting.
Whether Expense are paid in cash or not during the current year does not affect recording of expenses in the income statement.
Similary, whether cash has been received or not for revenue earned does not affect the recording of service revenue during the year in which revenue earned.
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