Question

During May, 2018, Sugar Inc. performs consulting services. The client does not pay Sugar until June, 2018. Multiple Choice Using the accrual basis of accounting, the revenue is reported in May 2018. Using the accrual basis of accounting, the revenue is reported when Sugar's expenses are paid. Using the accrual basis of accounting, the revenue is reported in June 2018. Using the cash basis of accounting, the revenue is reported in May 2018.

Answer 1

Answer: Using the Accrual basis of accounting, the revenues are reported in May 2018.

Explanation:

Accrual accounting is an accounting method in which the revenue or the expenses will be recorded when a transaction occurs and not when the payment for the transaction is received.

The method follows matching principle, that says that the revenues and the expenses must be recognized at the same period. Therefore, using the accrual basis of accounting, we can see that the revenues are reported in May 2018.