21 revenue is recorded when accounts receivable are collected under the cash basis o 4307407

21 revenue is recorded when accounts receivable are collected under the cash basis o 4307407

21) Revenue is recorded when accounts receivable are collected under the cash basis of accounting.

22) Under the cash method, revenue is recorded when cash is collected.

23) The accrual basis of accounting provides a better measure of economic performance than the cash basis.

24) Analyze the following transactions in the accounting equation using the following worksheet.

1. Sales of inventory for $20,000 on account; merchandise cost is $13,000.

2. Rent payment made in advance for $1,500.

3. Acquire additional inventory for $8,000; paid $2,000 cash with remainder on credit.

4. Received payment of $4,000 from customer who purchased goods on credit last month.

5. Returned defective inventory in the amount of $500. The inventory was purchased on account.

AccountsPrepaidAccountsRetained

CashReceivableInventoryRentPayableEarnings

1

1

2

3

4

5

25) Why doesn't the cash basis of accounting require adjusting accounts with accruals?

26) Describe the advantages of the accrual basis of accounting and the cash basis of accounting.

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