Brooks Landscaping Company performs lawn mowing services for its customers in May. Payments forâ May's services are expected to be received in June. How does the transaction for performing services in May affect the accounting equation of Brooksâ Landscaping?

Question

Leroy Watts

Business

12 October, 17:20

Brooks Landscaping Company performs lawn mowing services for its customers in May. Payments forâ May's services are expected to be received in June. How does the transaction for performing services in May affect the accounting equation of Brooksâ Landscaping?

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Answers (1)

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Clara · Answer 1

There should not be any affect on accounting equation of Brooksa Landscaping.

Explanation:

To understand this concept we need to look at what actually is accounting equation is. Accounting equation is:

Assets = Liabilities + owners equity

So, if Brooks landscaping performs a service in May, it can recognize its revenue in month of May but instead of balancing it with cash it will be balance against trade debtors (trade receivables). Therefore, the amount of assets will remain same even when payments are received in the month of June as it will be balanced out by crediting trade debtors and debiting cash. Hence, it can be seen that accounting equation remains unaffected due to this delay in actual payment.