Mave Corp.sells $5,000 of goods on account in the current year and collects $3,000 of this.It incurs $3,500 in expenses on account during the current year and pays $2,000 of them.Mave would report what amount of profit under the cash and accrual bases of accounting, respectively?

Question

Quizplus · Accepted Answer

Under the cash basis, profit is calculated as cash received ($3,000) minus cash paid for expenses ($2,000), resulting in $1,000. Under the accrual basis, profit is calculated as revenue earned ($5,000) minus expenses incurred ($3,500), resulting in $1,500.

Mave CorpSells $5,000 of Goods on Account in the Current Year