Double Industries: Analyzing July's Operations

What is the net income for July using the cash basis of accounting?

Can you determine the net income for July by summing up the cash received and deducting the cash paid based on the operations of Double Industries in July?

Net Income Calculation for July

The net income for July using the cash basis of accounting is calculated by summing the cash received and deducting the cash paid. In this case, the net income for July is $8,400.

In the cash basis of accounting, income is recognized when received, not when earned, and expenses are recognized when paid, not when incurred. In this scenario, to calculate the net income for July, we need to consider the cash transactions that occurred in July.

Cash Transactions in July:

A. Provided $8,200 of services in July on account. (This is not recognized in July under the cash basis because it has not yet been received.)

B. Received $3,400 cash from customers for services provided in July. (This is recognized.)

C. Received $1,600 cash for services to be provided in August. (This is also recognized in July despite the service to be offered in the future.)

D. Received $4,600 cash from customers on account for services provided in June. (This is recognized in July as it was received in that month.)

E. Paid June's warehouse rental bill on account in the amount of $1,200. (This is recognized as an expense in July under the cash basis of accounting because that is when it was paid.)

F. Received July's warehouse rental bill of $1,500; set it aside to be paid at a later date. (This is not recognized under the cash basis of accounting in July because it has not been paid.)

Summing up, we have $3,400 + $1,600 + $4,600 = $9,600 as total cash received and $1,200 as total cash paid. Therefore, the net income for July using the cash basis of accounting is $9,600 - $1,200 = $8,400.

By understanding the cash transactions and applying the cash basis of accounting principles, we can determine the net income for July accurately.