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Social Sciencexample #6The company received a bill for December’s utilities on January 5. The bill was for $235.Although the bill was received in January, the utilities were used in December to generate revenue in December. The matching principle tells us that we must record the utilities expense in December. This is from accoutinginfocus.com, is this right? I just asked a question here and one answer said we should not include this at 12/31, I am confused right now, which one is correct?
xample #6
The company received a bill for December’s utilities on January 5. The bill was for $235.
Although the bill was received in January, the utilities were used in December to generate revenue in December. The matching principle tells us that we must record the utilities expense in December.
This is from accoutinginfocus.com, is this right? I just asked a question here and one answer said we should not include this at 12/31, I am confused right now, which one is correct?
Expert Answer
Matching principle: As per this principle, the business entity should report an expense on its income statement in the accounting period in which the related revenues are earned, regardless of the related amount of cash received or paid.
This principle applies when the business entity follows the accrual accounting.
Accrual basis of accounting: Accrual basis of accounting refers to recognizing the financial transactions during the period in which the event occurs, even if the...
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