It will incur operating costs of $90,000, of which it will pay $70,000 during the year and $20,000 in the following year. It will also pay another $10,000 in costs incurred in the previous year.
1. Prepare two budgets, one on the cash basis, the other on the full accrual basis. Show both on the same schedule—the full accrual basis in the first column and the cash basis in the second column.
2. Comment on which budget better shows whether the Breast Cancer Fund is covering the economic cost of the services it provides.
3. Which budget is likely to be more useful to Breast Cancer Fund managers?