Asked by Abigail Small on May 09, 2024
Verified
According to the expense recognition principle,inventory costs are expensed as cost of goods sold when inventory is sold.
Expense Recognition Principle
An accounting principle that dictates expenses should be recognized in the same period as the revenues they help to generate.
- Grasp the principles behind the allocation of costs to cost of goods sold and inventory balance.
Verified Answer
JH
Jacob HenschelMay 10, 2024
Final Answer :
True
Explanation :
The expense recognition principle, also known as the matching principle, requires expenses to be recognized in the same period as the related revenue. Therefore, inventory costs are recognized as an expense (cost of goods sold) when the inventory is sold and the revenue is earned. This ensures that the expenses are directly matched with the revenue they helped generate, resulting in a more accurate representation of the company's financial performance.
Learning Objectives
- Grasp the principles behind the allocation of costs to cost of goods sold and inventory balance.
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