Question

The basic principle involved with expense recognition is____________.a. The business will continue to operate indefinitely unless there is evidence to the contrary. b. All transactions are recorded at the exchange price.c. The business is separate from its owners.d. All costs that are used to generate revenue are recorded in the period the revenue is recognized.

Answer 1

Answer:

The correct answer is letter "D": All costs that are used to generate revenue are recorded in the period the revenue is recognized.

Explanation:

According to the basic matching principle, revenues and the expenses necessary to obtain those revenues must be recorded during the same accounting period. This is part of what constitutes the accrual basis method of accounting that states expenses and revenue should be recognized when incurred not when cash is received.

Answer 2

Answer:

d. All costs that are used to generate revenue are recorded in the period the revenue is recognized.

Explanation:

The matching concept provides that expenses incurred in the process of generating sales should be recognized in the period for which revenue has been or will be recognized.

Hence, the basic principle involved with expense recognition is that all costs that are used to generate revenue are recorded in the period the revenue is recognized.