You started a new business one year ago. You've been very busy dealing with so many problems that you haven't had time to sit down and look at whether you made a profit or not. You haven't run out of cash (which for a start-up venture is quite an accomplishment), but you understand that the sustainability of the business depends on making a profit. The following two summaries present cash flow information for the year and information about two assets and a liability at year-end:
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Revenue and Expense Cash Flows For First Year
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$558,000 cash receipts from sales
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$375,000 cash payments for purchases of products
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$340,000 cash payments for other expenses
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Two Assets and a Liability at Year-End
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$52,000 receivables from customers for sales made to them during the year
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$85,000 cost of products in ending inventory that haven't yet been sold
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$25,000 liability for unpaid expenses
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Compare the profit or loss of your business for its first year according to the cash- and accrual-basis accounting methods. Show in an income statement.