Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

Which of the following violates the expense recognition (matching) principle?

Recognizing depreciation expense over the useful life of an asset

Recording cost of goods sold in the same period as the related sales revenue

Accruing employee wages earned but not yet paid at the end of the period

Recording advertising expenses in the period after the related sales are made

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Verified step by step guidance

Understand the expense recognition (matching) principle: This principle states that expenses should be recognized in the same period as the revenues they help generate. It ensures that financial statements accurately reflect the relationship between costs and revenues.

Analyze each option provided in the problem to determine whether it adheres to the matching principle. For example, recognizing depreciation expense over the useful life of an asset aligns with the principle because the expense is matched to the periods benefiting from the asset's use.

Evaluate the option of recording cost of goods sold in the same period as the related sales revenue. This adheres to the matching principle because the cost of goods sold is directly tied to the revenue generated from selling those goods.

Consider accruing employee wages earned but not yet paid at the end of the period. This also follows the matching principle because the wages are recognized in the period when the employees provided their services, which contributed to revenue generation.

Identify the violation: Recording advertising expenses in the period after the related sales are made violates the matching principle. Advertising expenses should be recognized in the period they contribute to generating sales revenue, not afterward.