A company purchased $400 of office supplies on account during May.All the supplies were used in May,and the account was paid during 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?

Question

Quizplus · Accepted Answer

1) The purchase was made on account, so there is no effect on cash during May.
2) Since all the supplies were used in May and there were no other cash transactions in relation to the supplies, there is no effect on cash-basis net income.
3) The purchase of $400 on account will increase accounts payable and decrease the accrual-basis net income.

A Company Purchased $400 of Office Supplies on Account During