In May, the Green Grass Company receives payment from its customers in advance for June landscaping...
In May, the Green Grass Company receives payment from its customers in advance for June landscaping services.
During June, the Company performs these landscaping services. How will these transactions affect the Green Grass Company's accrual-basis monthly financial statements?
Select one:
a. These transactions will show no effect on the Balance Sheet in May or June.
b. The Income Statement will show the effects of these transactions in June.
c. The Income Statement will show the effects of these transactions in May.
d. The Statement of Cash Flows will show the effects of these transactions in June.
Homework Answers
The answer is
B. The income statement will show the effects of these transactions in June
Under the accrual based accounting, revenue and costs are recognized in the period in which they are earned or incurred
Since the revenue related to June, it will be recognized in the income statement of June
This amount will reflect in liabilities in balance sheet of May hence a is incorrect
D. Is incorrect because cash flow impact will be in May as cash is received in May
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