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AC300_Finley_Joey_Cost_and_Expense_Recognition_Unit_3

AC300_Finley_Joey_Cost_and_Expense_Recognition_Unit_3 -...

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Running head: COST AND EXPENSE RECOGNITION 1 Cost and Expense Recognition Joey Finley Kaplan University Intermediate Accounting I AC300 Paula Beiser August 23, 2011
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Cost and Expense Recognition 1) An accountant must be familiar with the concepts involved in determining earnings of a company. The amount of earnings reported for a company is dependent on the proper recognition, in general, of revenue and expense for a given time period. In some situations costs are recognized as expenses at the time of product sale; in other situations guidelines have been developed for recognizing costs as expenses or losses by other criteria. a) Explain the rationale for recognizing costs as expenses at the time of product sale. i) The simple knowledge that must be understood is the Matching principle. (1) Benefit = sales of goods. (2) Expense = production cost. ii) The point of which product is sold, the item that you hold has left your location, the ownership of product has been changed to the purchaser,
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