Costs That Can Be Reasonably Associated with Specific Revenues but Not

question 42

Multiple Choice

Costs that can be reasonably associated with specific revenues but not with specific products should be

• A) charged to expense in the period incurred.
• B) allocated to specific products based on the best estimate of the production processing time.
• C) expensed in the period in which the related revenue is recognized.
• D) capitalized and then amortized over a period not to exceed 60 months.

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Definitions:

Matching Principle

An accounting principle that dictates that expenses should be matched with the revenues they helped to generate in the same period.

Revenues

Revenues refer to the total amount of money earned by a company from its business activities, such as the sale of goods or services, before any expenses are subtracted.

Expenses

Outflows or other using up of assets or incurring of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity's ongoing major operations.

Accrual Adjusting Entry

An accounting entry made to record revenues earned or expenses incurred that have not yet been recorded through regular transactions.