Expenses are recognized on the income statement in the time period in which they are incurred, not necessarily when they are paid. This is known as the accrual accounting method, which matches expenses with the revenue they help generate. The balance sheet, on the other hand, shows the financial position of a company at a specific point in time and does not reflect expenses.

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Expenses Are Shown

Question 32

Multiple Choice

Expenses are shown

A) on the income statement in the time period in which they are paid.
B) on the income statement in the time period in which they are incurred.
C) on the balance sheet in the time period in which they are paid.
D) on the balance sheet in the time period in which they are incurred.

Correct Answer: