A company provided $1,500 of services to customers during the month of May. The customers paid in June. What would the impact of these transactions be during May on (1) the balance of cash, (2) cash-basis net income, and (3) accrual basis net income?

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Question:

A company provided $1,500 of services to customers during the month of May. The customers paid in June. What would the impact of these transactions be during May on (1) the balance of cash, (2) cash-basis net income, and (3) accrual basis net income?

Answers

Answer:The answer is 3. accrual basis net incomeExplanation:Accrual basis is the effects of transactions on a reporting entity's economic resources in the period in which those transactions occur, even if the resulting cash receipt and payment occur in a different time.The $1,500 will be recorded in the month of MayCash basis recognizes transactions in the period in which cash receipts and payment occur. This can be found in government account.Option 1 is not correct because this is not a basis in preparing financial statement

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