T.S. Grewal Class 11 Chapter 4 Q.2 - Income on Accrual Basis of Accounting (Mohan)

Question 2

Taking the figures given in Q.1, find out the net income according to Accrual Basis of Accounting.

Given: Cash sales ₹90,000; Credit sales ₹60,000; Total expenses ₹70,000 (of which ₹30,000 outstanding).

Key Concept

Under Accrual Basis of Accounting, all revenue earned (whether received or not) and all expenses incurred (whether paid or not) during the year are recognised.

Solution

Cash Sales	₹90,000
Add: Credit Sales (earned, though not yet received)	+₹60,000
Total Sales (Revenue for the year)	₹1,50,000
Total Expenses for the year (paid + outstanding)	₹70,000

Mohan’s Income (Accrual Basis) = Total Sales − Total Expenses

Income	= ₹1,50,000 − ₹70,000
	= ₹80,000

Mohan’s income for the year (Accrual Basis) = ₹80,000

Comparison with Cash Basis (Q.1)

Basis	Revenue Considered	Expenses Considered	Income
Cash Basis	₹90,000	₹40,000	₹50,000
Accrual Basis	₹1,50,000	₹70,000	₹80,000