WHUTChapter 5Expense MeasurementTheIncome Statementiioo100310rO01O101001313000
WHUT Chapter 5 Expense Measurement; The Income Statement
LearningObjectivesThe difference between expense andexpenditure;Howthe expenses of a period are measured;The matching concept;The meaning of items reported on an incomestatement;Methods of analyzing an income statement.WHUTAccountingdepartmentofmanagementschool
WHUT Accounting department of management school Learning Objectives The difference between expense and expenditure; How the expenses of a period are measured; The matching concept; The meaning of items reported on an income statement; Methods of analyzing an income statement
1.Expenseand ExpenditureAn expense is reported on the incomestatement.An expense is a cost that has expired, wasused up, or was necessary in order to earnthe revenues during the time periodindicated in the heading of the incomestatementWHUTAccountingdepartmentofmanagementschool
WHUT Accounting department of management school 1. Expense and Expenditure An expense is reported on the income statement. An expense is a cost that has expired, was used up, or was necessary in order to earn the revenues during the time period indicated in the heading of the income statement
1.Expense and ExpenditureAn expenditure is a payment ordisbursement. The expenditure may be forthe purchase of an asset, a reduction ofa liability, a distribution to the owners,or it could be an expense.An expenditure to eliminate a liability is notan expense, while expenditures foradvertising, salaries, etc. will likely berecorded immediately as expenses.WHUTAccountingdepartmentof managementschool
WHUT Accounting department of management school An expenditure is a payment or disbursement. The expenditure may be for the purchase of an asset, a reduction of a liability, a distribution to the owners, or it could be an expense. An expenditure to eliminate a liability is not an expense, while expenditures for advertising, salaries, etc. will likely be recorded immediately as expenses. 1. Expense and Expenditure
2.Matching(expenserecognition)Expense recognition is traditionally tied torevenue recognitionThis practice - referred to as the matchingprinciple- dictates that expenses be matched withrevenues in the period in which efforts areexpended to generate revenues.WHUTAccountingdepartmentofmanagementschool
WHUT Accounting department of management school 2.Matching (expense recognition) Expense recognition is traditionally tied to revenue recognition This practice – referred to as the matching principle – dictates that expenses be matched with revenues in the period in which efforts are expended to generate revenues