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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In May, there would be no effect on cash since the payment was received in June. Cash-basis net income would also see no effect in May because under cash-basis accounting, income is recognized when cash is received. However, under accrual basis accounting, income is recognized when earned, so the accrual basis net income would increase in May when the services were provided, regardless of when the payment was received.

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