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 statements best describes the expense recognition (matching) principle?

Expenses are recorded only when cash is paid.

Expenses should be recognized only at the end of the fiscal year.

Expenses should be recognized in the same period as the revenues they help to generate.

Expenses are recognized when goods are produced, regardless of when they are sold.

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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 accounting period as the revenues they help to generate. It ensures that financial statements accurately reflect the relationship between costs incurred and the revenue earned.

Analyze the options provided in the problem: Carefully read each statement and compare it to the definition of the expense recognition principle.

Eliminate incorrect options: For example, 'Expenses are recorded only when cash is paid' is incorrect because expenses are recognized based on accrual accounting, not cash basis. Similarly, 'Expenses should be recognized only at the end of the fiscal year' is incorrect because expenses are recognized when they contribute to revenue, not based on timing like year-end.

Evaluate the correct option: The statement 'Expenses should be recognized in the same period as the revenues they help to generate' aligns with the expense recognition principle, as it matches expenses to the revenue they help produce.

Confirm understanding: Ensure you understand why the correct option is consistent with the principle and why the other options are not. This will help reinforce the concept for future applications.