You have been provided the following information about Kedgwick Company, a small proprietorship, as of the end of its first year of operations. Assume that all supplies were used up at year end.
Cash collected from customers......... $8,000
Amounts owing from customers....... 1,200
Amounts paid to suppliers ........4,700
Amounts owing to suppliers ..........1,100

Required:
Calculate net income on the cash basis and on the accrual basis for Kedgwick Company.
Explain why the cash basis and the accrual basis result in different amounts of income.