Question

Beryl Strauss began a music business in July 2014. Strauss prepares monthly financial statements and uses the accrual basis of accounting. The following transactions are Strauss Company's only activities during July through October Jul 14 Bought music on account for $25, with payment to the supplier due in 90 days. Aug 3 Performed a job on account for Jimmy Jones, for $40, collectible from Jones in 30 days. Used up all the music purchased on July 14. Sep 16 Collected the $40 receivable from Jones Oct 22 Paid the $25 owed to the supplier from the July 14 transaction

1. In which month should Strauss record the cost of the music as an expense?

2. In which month should Straiss report the $40 revenue on its income statement?

3. If Strauss Company uses the cash basis of accounting instead of the accrual​ basis, in what month will Strauss report revenue and in what month will it report​ expense?

Answer 1

1. In which month should Strauss record the cost of the music as an expense?

in the Month of August Strauss should record the cost of the music as an expense (The matching principle expense should math with the income)

2. In which month should Straiss report the $40 revenue on its income statement?

in the Month of August Strauss should report the $40 revenue on its income statement (income should recognized in the moth when its performed)

If Strauss Company uses the cash basis of accounting instead of the accrual​ basis, in what month will Strauss report revenue and in what month will it report​ expense?

under cash basis income or expense is recognized in the month where actual cash flow incur

what month will Strauss report revenue =September

what month will it report​ expense=October