Joined: 12 Nov 2009 Location: United States
Online Status: Offline Posts: 90
Posted: 28 Sep 2010 at 15:24 | IP Logged
Maybe this is really basic for some people but please
bear with me.
------
On April 1, Year 1, Ivy began operating a service
proprietorship with an initial cash investment of $1,000.
The proprietorship provided $3,200 of services in April
and received full payment in May. The proprietorship
incurred expenses of $1,500 in April, which were paid in
June. During May, Ivy drew $500 against her capital
account.
What was the proprietorship's income for the two months
ended May 31, Year 1, under the following methods of
accounting?
The answer is $3,200 cash and $1,700 accrual. What I
don't understand is aren't the start-up costs expensed?
Why aren't they included in income? Or does the $1,500 of
expenses in April include the $1,000 start-up costs?
__________________ AUD - 11/16/09 - 81
BEC - 01/15/10 - 80
FAR - October/November
REG - Not yet determined
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Topic: Expensing Start-up Costs
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