AC300-03_Unit3 Assignment_Marjorie Bowden

AC300-03_Unit3 Assignment_Marjorie Bowden - that are...

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AC300-03 Unit 3 Assignment Marjorie Bowden C2-5 1) Explain the rationale for recognizing costs as expense at the time of product sale. This is known as association of cause and effect. Some transactions will result in both revenue and an expense; they should both be recognized at the same time. These types of expenses include sales commissions and product costs included in the cost of goods sold. 2) What is the rational underlying the appropriateness of treating costs as expenses of a period instead of assigning the costs to an asset? Explain. This is known as immediate recognition. This is done because the cost incurred during the period provides no evident future benefits, or the allocation of costs among accounting periods, or because of the cause and effect relationship is not useful. Costs
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Unformatted text preview: that are recognized in the current period include salaries, and most selling and administrative costs. 3) Some expenses are assigned to specific accounting periods on the basis symptomatic and rational allocations of asset cost. Explain the underlying rationale for recognizing expenses on this basis. Many assets provide benefits for several periods. A portion of the cost of each asset is rationally recognized as an expense each period. The allocation system should be based on the pattern of benefits anticipated. These expenses include depreciation of property and equipment, as well as amortization of intangibles....
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