Question

On March 4, Tonkawa Law asks Green Lawn Services for basic lawn maintenance totaling $200. Green Lawn provides maintenance on March 8, and Tonkawa pays for the lawn maintenance on March 12. Under accrual-basis accounting, on which date should Tonkawa record lawn maintenance expense?

Multiple Choice

March 4 (date of request).

March 8 (date of lawn maintenance service).

March 12 (date of cash payment).

Evenly over the three dates.

Answer 1

Tonkawa Law should record the lawn maintenance expense on March 8, the date the service was provided, according to accrual-basis accounting principles.

Step-by-step explanation:

Under accrual-basis accounting, expenses should be recorded when they are incurred, regardless of when the payment is made. Therefore, Tonkawa Law should record the lawn maintenance expense on the date the service was provided by Green Lawn Services. In this scenario, the lawn maintenance service was performed on March 8, which is the date that Tonkawa Law should record the maintenance expense in their accounting records.

Under accrual-basis accounting, expenses are recorded when they are incurred or earned, regardless of when the cash is paid or received. In this case, Tonkawa Law should record the lawn maintenance expense on March 8, the date when Green Lawn Services provided the maintenance. This is because the expense was incurred on that date, even though Tonkawa paid for it on March 12.