Week Two EOC; Question Four

a .Lisa's Accrual accounting showed a higher net profit by $2,500.

b. Laura's Cash accounting is much more accurate and will show how much money has already been spent and a precise number of what is left. According to the book, accuracy is important because "Clearly, if the bookkeeping tasks of the servers, bartenders, kitchen staff, and managers of a restaurant, and the front desk, controller, and other staff of a hotel are not properly performed, the resulting financial data generated by these business’s accountants will not be accurate and decisions made based upon the numbers supplied are likely to be flawed as well."

c. The accounting method that most accurately shows expensive regardless of when they were paid is the accrual accounting. The reason for this lies with the fact that the accrual shows exactly what is happening throughout the expenses and even includes what has not yet been paid yet.

d. Again, similar to question c, accrual is going to be the most efficient due to the fact that it shows all expenses and tracks the ones that have yet to receive payment, which is going to show an accurate representation of expenses. Correlating with the book "the accrual system instructs accountants to record expenses when they are incurred regardless of when they are paid."

e. Laura's Cash Accounting format is much more accurate in terms of cash inflow. It will show the numbers for exactly what has been received in cash and which has not, which is something the Accrual form lacks. "Just as the going concern principle requires accountants to value a business’s assets at their purchase price, with few exceptions, it requires businesses to set the value of the items it intends to sell at the price the business actually paid for them."

f. Accural accounting is going to be the most accurate reflection of the restauraunt's profitiblity. The reason for this is the ability of this form to show a true understanding of the profits.