A company has provided you with the following information about January's income. If the company uses a cash basis of accounting, what is their net income for the month of January?

Alright. Let's try this one here. The company has provided you with the following information about January's income. Alright. So we've got some information there. Let's see what they're asking us. If the company uses a cash basis of accounting, what is their net income for the month of January? Okay. So two things to note here. 1st, they're asking us to solve for net income. Right? Net income, well, that's just revenue minus expenses. Right? Our revenues minus our expenses leaves us with our net income. Cool? And the next thing is that we're talking about a cash basis of accounting. Right? When we're in a cash basis of accounting, we're only worried about the cash transactions. When we have cash coming in, that's generally gonna be revenue that we're receiving, and when there's cash going out, that's gonna be expenses that we're paying for. Okay? So let's go ahead and start this right here. I'm gonna make a column here for cash basis because the next problem is going to ask us about the accrual basis, and we can do another column there. So let's think about each one of these items. Cash sales. From a cash perspective, this is when we earn revenue. Right? When we sell stuff and we get cash for it. Well, that is going to be revenues right there. Right? When we make sales and we receive cash, good. That's revenue. How about credit sales? Credit sales, that's when we provide something to the customer, but they haven't paid us yet. Remember, from a cash basis of accounting, this does not count as revenue. Right? We only wait until we actually receive the cash. When we receive the cash, that's when we take the revenue. And this is only in a cash basis. So in a cash basis, this is not revenue. I'm gonna put not rev for not revenue. Okay? How about when we receive the cash from customers? So this cash received from customers that you could imagine that we had these credit sales where customers owed us money and then they eventually paid us. Right? So we received 1200 in cash from customers. Well, this is revenue. Right? From a cash basis of accounting, we didn't take the revenue when we made the credit sale. But now, we take the revenue when they finally pay us. Okay. So that 1200, received from the customers is going to be revenue here in a cash basis. Okay. How about invoices received from suppliers? Notice, suppliers sent us $$1200 worth of invoices this month and it says that there's 400 in unpaid invoices. Okay. So there's actually kind of a trick going on here. They both kind of go hand in hand here. So remember, we're looking from a cash basis. How much was paid in cash? Well, they received 1200 of $$invoices but they didn't pay for all of them. Right? They only paid well, they didn't pay for 400 of them. Right? So they paid for the rest of them except for those 400. So we've gotta find out how many they did pay. So on if unpaid invoices were 400, that means paid invoices are gonna be the 1200 received minus the 400 left unpaid. Well, that's gonna be 800 as an expense. Right? So we're gonna have an $$800 expense from those invoices that were paid in cash. Right? So that's the whole trick here. Those paid invoices, the 1200 minus the 400 left unpaid, those were paid in cash. Right? You can see the trick there. They didn't really tell us the amount paid in cash. We had to infer it from the information. So there's 800 in $$expenses there that were paid in cash. And how about the next one? It says cash paid to employees for work performed in January. Well, we paid cash and they performed the work in January. This doesn't really matter when they perform the work. When we pay them in a cash basis, that is when we take the expense. So that's gonna be an expense right there. And the last one, unpaid wages from the last 3 days of January. Unpaid wages, we didn't pay any cash. Right? So there's gonna be no expense because there was no cash transferred. Alright. Cool. So now we've gone through all the things and we are ready to find our net income. Right? We're just gonna have to find all our revenues and then subtract all our expenses. So we had our cash sales of 28100 plus our cash received from customers of 1200. That's gonna be our revenues. Our revenues are going to be 28100 +1200, that's 4,000 in revenue. And how about our expenses? So 4,000 in revenue, we had expenses of $800 in those invoices. So that we paid just in general expenses, we'll say 800. And what other expenses did we have? 800 and the cash paid to employees for work performed, that's 1600. Right? The unpaid wages is not an expense. So we come down to the 24100 in expenses. Okay? So revenue minus expenses is going to be 1600, and that is our net income right there. Okay. So net income is going to be 1600. The answer is d as in dog. Okay. 1600. Alright. Cool. Let's move on to the next one and see how the accrual basis of accounting would deal with the same information. Let's check it out.

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A company has provided you with the following information about January's income. If the company uses a cash basis of accounting, what is their net income for the month of January?

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