Answer:
ASSOCIATING CAUSE AND EFFECT :
many costs are linked to the revenue they help produce, for examples, a sales commission owed to an employee is based on the amount of a sale. therefore, commission expense should be recorded in the same accounting period as the sale... these costs are recognized immediately
Explanation:
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70.
c. Depreciationb. Sales commissiond. Officers’ salaries
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Expense recognition will typically follow one of three approaches, depending
on the nature of the cost:
Payment vs. Recognition
It is important to note that receiving or making payments are not criteria for initial revenue or expense recognition. Revenues are recognized at the point of sale, whether that sale is for cash or a receivable. Expenses are based on one of the approaches just described, no matter when payment occurs. Recall the earlier definitions of revenue and expense, noting that they contemplate something more than simply reflecting cash receipts and payments. Much business activity is conducted on credit, and severe misrepresentations of income could result if the focus was simply on cash flow.
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What are the three general rules, with examples of each, for expense recognition? |
Understand the importance of the matching principle to expense recognition and income measurement. |
Distinguish between payment and recognition. |
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