which of the following is a true statement regarding expenses?\na. the expense recognition principle…

which of the following is a true statement regarding expenses?\na. the expense recognition principle recognizes expenses in the same period in which the related revenues are earned.\nb. expenses will never result in the creation of a liability account.\nc. the critical event for recording salary expense is the payment of cash.\nd. expenses represent future benefit to the company.

which of the following is a true statement regarding expenses?\na. the expense recognition principle recognizes expenses in the same period in which the related revenues are earned.\nb. expenses will never result in the creation of a liability account.\nc. the critical event for recording salary expense is the payment of cash.\nd. expenses represent future benefit to the company.

Answer

Brief Explanations:

  • Option A: The expense recognition principle (matching principle) states that expenses should be recognized in the same period as the related revenues. This is a fundamental accounting concept.
  • Option B: Expenses can create liability accounts. For example, if a company incurs an expense but has not yet paid for it (e.g., accrued salaries), a liability (salaries payable) is created.
  • Option C: The critical event for recording salary expense is when the employees have provided the service (earned the salary), not when the cash is paid. This is in line with the accrual - basis accounting.
  • Option D: Expenses represent costs that have been used up to generate revenues. Assets represent future benefits to the company.

Answer:

A. The expense recognition principle recognizes expenses in the same period in which the related revenues are earned.