Week Two EOC: Question Four

Answers:

a. Neither showed profit, however Laura is is less debt (7,850) compared to lisa (10,750).

b. Laura's cash accounting is more accurate becuase of the fact that this method is based on the cash on hand rather than before taxation and loss due to expenses.

c. Lisa's accrual accounting is most accurately shows the revenues generated regardless of when they were received, In an accrual accounting system, revenue is recorded when it is earned, regardless of when it is collected, and expenses are recorded when they are incurred, regardless of when they are paid.49.

d. Laura's cash accounitng most accurately shows the expenses incurred regardless of when they were paid, expenditures are recorded when they are actually paid, regardless of when they were incurred. 49.

e. Lisa's method most accurately shows actual cash inflows and outflows, it shows: Sales of products and services (including accounts receivable), Interest and dividend income, and Expenses related to the sales of products and services (including inventories and accounts payable). 157.

f. Lisa's method is the most accurate reflection of their restaurant’s true profitability because accrual accounting shows the raw income before the taxation and loss