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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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What are three principles for determining when expenses should be recognized? Give at least one example of an expense that would be recognized under each principle.

To determine

Explain the three principles, which are used to determine the recognition of expenses.

Explanation

Expenses:

Expenses are costs incurred for the operations of a business. These expenses measures and report the sacrifices and efforts that are made to run the business activities.

Three principles which are used to determine the recognition of expenses:

  • Association of cause and effect.
  • Systematic and rational allocation.
  • Immediate recognition.

Association of cause and effect: In this various costs are recognized as an expense on the nature of a direct association with particular revenues...

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