Question

Prepare an income statement for May assuming the following data are not included above: (1) $900 worth of services were performed and billed but not collected at May 31, and (2) $1,000 of gasoline expense was incurred but not paid.

Answer 1

Answer:

Income statement.

Revenue      900

Expenses   1.000

Loss             -100

Explanation:

(1) $900 worth of services were performed and billed but not collected at May 31

Accounting guideline requiring that revenues be shown on the income statement in the period in which they are earned, not in the period when the cash is collected.

(2) $1,000 of gasoline expense was incurred but not paid.

In accrual accounting, the revenue recognition principle states that expenses should be recorded during the period in which they are incurred, regardless of when the transfer of cash occurs