Chapter 1, Problem 1.13BYP

Analysis Case 1–13

Expense recognition

• LO1–9

Revenues measure the accomplishments of a company during the period. Expenses are then matched with revenues to produce a periodic measure of performance called net income.

Required:

1. Explain what is meant by the phrase matched with revenues.

2. Describe the four approaches used to implement expense recognition and label them 1 through 4.

3. For each of the following, identify which expense recognition approach should be used to recognize the cost as expense.

a. The cost of producing a product

b. The cost of advertising

c. The cost of monthly rent on the office building

d. The salary of an office employee

e. Depreciation on an office building