During June,the Grass is Greener Company mows 100 lawns a week and is paid in July by those customers.The company uses the accrual basis of accounting.Which financial statement is impacted by these transactions?
A) The income statement shows the effects of the transactions in June.
B) The income statement shows the effects of the transactions in July.
C) The balance sheet shows no effect from the transactions in June.
D) The transactions have no effect on the balance sheet.

Question

Quizplus · Accepted Answer

Under the accrual basis of accounting, revenue is recognized when it is earned, not when payment is received. Therefore, the income statement will reflect the revenue from mowing lawns in June, even though payment is received in July.

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