During August,your company sells $10,000 of services that cost $8,000 to provide.You report the revenue in August and the expenses (that is,the costs incurred to provide those services)in September and October when they are paid.This is an acceptable accounting procedure.
BT: Comprehension

Question

Quizplus · Accepted Answer

This is not acceptable because it violates the matching principle in accrual accounting, which states that expenses should be recorded in the same period as the revenues they help to generate.

During August,your Company Sells $10,000 of Services That Cost $8,000