During year 1, Ray Ltd invoiced its customers \($100\) 000 for services performed. It received \($75\) 000 cash in year 1 and the balance in year 2. Expenses paid during year 1 amounted to \($45\) 000 but another \($13\) 000 of expenses were not paid until year 2. Calculate the profit for year 1 based on the income and expense recognition criteria.
Reasoning
Income is recognised when an increase in future economic benefits related to an increase in an asset or a decrease of a liability has arisen that can be measured reliably. Expenses are recognised when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably.