Question

The following information pertains to Gone Company: May 1 Customer ordered an installation service to be done by GoneCompany on May 15. May 2 Customer paid cash for the installation job to be done on May 15. May 8 The Gone Company purchased installation supplies on account for the job. May 15 The installation job was started and completed. May 20 Amount owed for supplies purchased on May 8 is paid. Assuming that Gone Company uses accrual-basis accounting, when would the company record the expense related to the supplies?

Answer 1

May 15

Step-by-step explanation:

Accrual accounting recognizes revenues when earned and expenses when incurred. Revenues and expenses do not reflect the receipt and payment of cash. In this method entries are passed without cash exchange that is when expenses or revenue accrue.

The expense related to supplies accrued on May 15 when the order was started and completed by the Gone Company.So the journal Entry for expense accrued would be passed on May 15.