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Question

During the financial year,Rajan had cash sales of Rs.4,50,000 and credit sales of Rs.3,00,000.Expenses incurred for the year were Rs.3,50,000 out of which Rs.1,50,000 are still to be paid.

Find out Rajan's income following

(i) Cash Basis of Accounting

(ii) Accrual Basis of Accounting.

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Solution

(i) Cash Basis of Accounting
= 4,50,000 - 2,00,000 (3,50,000-1,50,000)
= Rs.2,50,000

(ii) Accrual Basis of Accounting
= 4,50,000+3,00,000-3,50,000
= Rs.4,00,000


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