During 2016,a company makes credit sales of $600 000,of which $350 000 is collected at year-end.It pays $220 000 in expenses and owes $20 000 for electricity used during 2016.Profit according to accrual accounting is:
A) $130 000.
B) $380 000.
C) $360 000.
D) $710 000.

Question

Quizplus · Accepted Answer

The revenue earned during the year was $600,000, but only $350,000 was collected at year-end, so the remaining $250,000 is still owed and is considered Accounts Receivable. 
The expenses were $220,000, so the company's net revenue is $600,000 - $220,000 = $380,000. 
However, the company also owes $20,000 for electricity used during the year, which is considered an Accounts Payable. 
Therefore, the company's profit according to accrual accounting is $380,000 - $20,000 = $360,000.

During 2016,a Company Makes Credit Sales of $600 000,of Which