The accounting principle of expense recognition is best demonstrated by
A) not recognizing any expense unless some revenue is realized.
B) associating effort (expense) with accomplishment (revenue).
C) recognizing prepaid rent received as revenue.
D) establishing an Appropriation for Contingencies account.

Question

Quizplus · Accepted Answer

The expense recognition principle, also known as the matching principle, suggests that expenses should be recognized (recorded in the accounting system) in the same period as the related revenue, or effort should be associated with accomplishment. This helps to ensure that the financial statements accurately reflect the results of operations for a given period. Option A is incorrect because recognizing revenue is not a requirement for recognizing expenses. Option C is incorrect because prepaid rent received is not an expense, it is a liability until the rental period is over. Option D is incorrect because establishing an Appropriation for Contingencies account is not related to the expense recognition principle.

The Accounting Principle of Expense Recognition Is Best Demonstrated by