ual basis Rs. Following information are given: Total cash revenue of the period is Rs. 40,000 and on account Rs. 70,000. Operating expenses (except prepaid insurance) paid during the period is Rs. 32,000 payable Rs. 10,000. iii. Prepaid insurance Rs. 6,000. Required: Income statement under cash and accrual basis of accounting for the period. i. ii.
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Answer:
The income statement under cash and accrual basis of accounting for the period would show a deficit of Rs. 12,000. This is because the operating expenses paid during the period (excluding prepaid insurance) was more than the cash revenue received. The prepaid insurance expense of Rs. 6,000 would have to be included in the income statement to bring the total deficit down to Rs. 0.
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