A dance studio accepts $1,500 to provide a series of dance lessons to a youth group during the month of July.The studio decides to record the revenue in July.The studio incurs rent,utilities,and salaries expenses in July.The studio decides to record those expenses in August,when it pays for them.One or both of these decisions:
A) violate the expense recognition principle.
B) are an example of accrual accounting.
C) violate the revenue recognition principle.
D) violate the accounting equation.

Question

Quizplus · Accepted Answer

The decision to record expenses in August, when they are paid, violates the expense recognition principle, which states that expenses should be recorded in the period in which they are incurred, not when they are paid.

A Dance Studio Accepts $1,500 to Provide a Series of Dance