Answered: Expenses are the costs incurred or to…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Expenses

Expenses are the costs incurred or to be incurred in order to carry on the business activities.

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Reason for certain expenses that require estimates for the future

Certain future expenses are to be estimated and provided because they represent an outflow of economic resources for settlement. The known expenses in future should be estimated as a matter of prudence concept in accounting. This will enhance the readability and understandability of the financial statements.

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Examples

1. Provision for doubtful debt

2. Provision for warranty

What are 1 & 2?

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