During June,the Grass is Greener Company mows 100 lawns a week; the company was paid in advance during May by those customers.The company uses the accrual basis of accounting.How will these events affect the company's financial statements?
A) The income statement shows the effects of the transactions in May.
B) The income statement shows the effects of the transactions in June.
C) The balance sheet shows no effect from the transactions in May.
D) The balance sheet shows no effect from these transactions in May or June.

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, revenue is recognized when it is earned, not when cash is received. Therefore, the income statement will reflect the revenue in June when the service is performed.

During June,the Grass Is Greener Company Mows 100 Lawns a Week;