When a direct cause-and-effect relationship cannot be established between revenues and costs,the costs are
A)not expensed and remain as assets on the balance sheet.
B)expensed among the accounting periods that benefit from the costs.
C)expensed immediately in their entirety.
D)expensed equally each year.

Question

Quizplus · Accepted Answer

When a direct cause-and-effect relationship cannot be established between revenues and costs, the costs are expensed among the accounting periods that benefit from the costs. This is known as the matching principle, which requires expenses to be allocated to the periods in which the related revenue is recognized. Therefore, option B is the most appropriate choice.

When a Direct Cause-And-Effect Relationship Cannot Be Established Between Revenues