Wk 2 EOC: Chapter 2, Question 4

a. Which accounting method, Lisa's accrual accounting or Laura's cash accounting, shows a higher net profit?

b. Which accounting method shows the most accurate amount of money on hand to pay bills?

c. Which accounting method most accurately shows the revenues generated regardless of when they were received?

d. Which accounting method most accurately shows the expenses incurred regardless of when they were paid?

e. Which accounting method most accurately shows actual cash inflows and outflows?

f. Which accounting method shows the most accurate reflection of their restaurant’s true profitability?

Answers:

a. Lisa's accrual accounting shows a higher net profit at 10,750.

b. The most accurate would be Cash Accounting because it shows the real time profit at the moment in time of the transaction.

c. The most accurate would be the Accrual Accounting as it shows the entire profit.

d. Also the most accurate would be Accrual because it shows the actual profit regardless of the time it was paid.

e. The most accurate would be Cash Accounting because it shows all of the money that was added and taken from the account.

f. Accrual would be the most accurate because it shows the profit in its entirety.