The expense recognition principle refers to
A) recognizing revenue in the period when it is earned.
B) matching the revenue reported on the income statement with the receivable reported on the statement of financial position.
C) letting expenses follow revenues.
D) dividing the life of the business into artificial time periods.

Question

Quizplus · Accepted Answer

The expense recognition principle, also known as the matching principle, states that expenses should be recognized in the same period as the revenues they helped to generate. This means that expenses should follow revenues, rather than the other way around. This is important for accurate financial reporting and to ensure that the income statement truly reflects the profitability of an entity in a given period.

The Expense Recognition Principle Refers to