Question

Cash & Accrual Accounting Entries

Company X buys office supplies that value TT$50,000.00 on May 12, 2015. The company pays

TT$20,000.00 by cash on May 31, 2015, TT$25,000.00 by cheque on June 2, 2015 and transferred TT$5,000.00 from its bank account directly to the bank account of the supplier on June 3, 2015.

Record the transactions in the books of Company X under the cash basis?

Record the transactions in the books of Company X under the accrual basis?   

Answer 1

IN THE BOOKS OF COMPANY X UNDER THE CASH BASIS: Under the cash basis of accounting, transactions are only recorded when there is a related change in cash. This means that there are no accounts receivable or accounts payable to record on the balance sheet, since they are not noticed until such time as they are paid by customers or paid by the company, respectively.

Journal Entries

Date		Debit	Credit
MAY 31,2015	Office Supplies A/c (Dr)	20000
	To Cash A/c (Cr)		20000
JUNE 2,2015	Office Supplies A/c (Dr)	25000
	To bank A/c (Cr)		25000
JUNE 3,2015	Office Supplies A/c (Dr)	5000
	To bank A/c (Cr)		5000

IN THE BOOKS OF COMPANY X UNDER THE ACCRUAL BASIS: Records revenues and expenses as they are earned or incurred, irrespective of changes in cash.

Date		Debit	Credit
MAY 12,2015	Office Supples A/c(Dr)	50000
	To Payables (Cr)		50000
MAY 31,2015	Payables A/c (Dr)	20000
	To Cash (Cr)		20000
JUNE 2,2015	Payables A/c (Dr)	25000
	To Bank (Cr)		25000
JUNE 3,2015	Payables A/c (Dr)	5000
	To Bank A/c (Cr)		5000