Expense recognition: Expenses are recognized as incurred, typically as goods are received and services rendered

  • An inventory item will not be an expense until it is sold
  • Matching principle dictates that the expense be made at the same point as income
  • Prepaid expenses such as rent and insurance paid ahead of time are assets and not recognized as expense until these items are used over time
  • Property, plant, and equipment are capitalized assets, not expenses

K_8F_Expense recognition

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