Expense Recognition Principle -
It is to be expected that in accounting there are principles to follow, just as they are in other various fields regarding finances. An example of this is banking where allocations and limitations are set. According to the principle of expense recognition revenue reflects in earning periods. Our expression as consumers is to enter into an agreement that has something to offer both parties. As the seller I am choosing the price, and the buyer agrees to listed price. The transaction has informed an agreement that is recognized through assurance. (Boundless Accounting)
To recognize expenses, revenue is regarded and allies to the balance sheet. For example as the owner of a good I have fixed costs, and production cost that are in place whether I sell the goods or not. In lieu of the expenses recognition, we must meet the matching principle to move up own our balance sheet. An income statement shows these transactions due to the fact we are forced to record revenue and expenses, specifically those relating in cash. Costs are to broad to list all of them in an essay forum. However the two main categories are product costs and period costs. What are these? Period costs are things such as payroll, admin related expenses, and benefits solutions. In most cases these are documented when they take place. Product costs are things such as material, contract labor, utilities and or overhead expenses. These costs are all in support of creating the product in its manufacturing stage. There is a growing concern that the matching principle allures deferment and non-reporting of essential entries. Answering these areas are better left to the auditors to
