Multiple Select Question Select all that apply On June 30 , Cyclepath, Inc. pays \( \$ 600 \) for supplies that will be used in July. Which of the following statements are true? \( \square \) In July, Supplies Expense is debited and Supplies is credited. \( \square \) In June, Supplies is debited and Cash is credited. \( \square \) In July, no entry is recorded related to supplies. \( \square \) In June, Supplies Expense is debited and Cash is credited.
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When Cyclepath, Inc. pays for supplies in June, it records the supplies as an asset and reduces cash. So on June 30, the correct entry is to debit Supplies and credit Cash. This means in July, when the supplies are used, an expense is recorded. Thus, the first and second statements are true, while the others are not. In accounting, this is a great example of the accrual basis, where expenses are recognized when they are incurred, not necessarily when cash is paid. This helps businesses accurately reflect their financial position at any time. Also, a common mistake here can be confusing the timing of expense recognition. While it might seem logical to record an expense when cash is paid, using the accrual accounting method means you’re focusing on the period when the benefit of those supplies is actually used! Keeping track of these entries accurately is vital for ensuring clear financial reporting.
