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 each of the following three items?
$\quad$Cash $\quad$$\quad$$\quad$$\quad$Cash-basis $\quad$Accrual-basis
$\quad$Balance$\quad$$\quad$$\quad$ Net Income $\quad$Net Income
a.$\text { No effect\quad\quad No effect\quad\quad Increase }$
b.$\text { No effect\quad\quad No effect\quad\quad No Effect }$
c.$\text { Increase\quad\quad Increase\quad\quad Increase }$
d.$\text { Increase \quad \quad Increase\quad\quad No effect }$

Question

Quizplus · Accepted Answer

Under the accrual basis, revenue is recognized when earned, so net income increases in May. Under the cash basis, revenue is recognized when cash is received, so there is no effect on cash or cash-basis net income in May.

A Company Provided $1,500 of Services to Customers During the Month