A test for distinguishing between an asset and an expense is
A)whether the item will be turned into cash by the end of the accounting period.
B)whether the benefit extends into the next accounting period.
C)whether the payment is made in cash.
D)the amount of the transaction.

Question

Quizplus · Accepted Answer

The key factor in distinguishing between an asset and an expense is whether the benefit of the item extends into the next accounting period. Assets are items that provide future economic benefits, while expenses are items that have already been consumed or used up in the current period. The other choices are not relevant in determining whether an item is an asset or an expense.

A Test for Distinguishing Between an Asset and an Expense