When a business uses up its resources to generate revenues for the period,it reports an expense only when it pays for them.

Question

Quizplus · Accepted Answer

The statement is not entirely true. The business should report an expense when it uses up its resources, even if it has not yet paid for them. This is because expenses are recognized based on the matching principle, which requires that expenses be reported in the same period as the revenues they help to generate. However, if the business has paid for resources that it has not yet used, it should not report them as expenses until they are actually used.

When a Business Uses Up Its Resources to Generate Revenues