The expense recognition principle requires:
A)that expenses should be recognized on periodic basis.
B)that expenses should be split between Cost of Goods Sold (sometimes called Cost of Sales)and Selling Expenses.
C)that current assets and current liabilities are stated in a certain order on the balance sheet.
D)that costs are recognized as expenses in the same period as the revenues they generate.

Question

Quizplus · Accepted Answer

The expense recognition principle states that costs should be recognized as expenses in the same period as the revenues they generate. This is important for matching the costs of producing goods or services with the revenues they generate, which provides a more accurate picture of a company's financial performance. Option A refers to the periodicity assumption, which is separate from expense recognition, while Option B refers to how expenses are categorized on the income statement. Option C refers to the liquidity order of balance sheet items, which is also separate from the expense recognition principle.

The Expense Recognition Principle Requires