Expenses are recognised in the statement of profit or loss and other comprehensive
Income when
A) increase in future economic benefits related to a increase in an asset or an increase in a liability can be measured reliably.
B) a decrease in future economic benefits related to a decrease in an asset or an increase in a liability can be measured reliably.
C) a decrease in future economic benefits related to a decrease in an asset or an decrease in a liability can be measured reliably.
D) none of the options are correct.

Question

Quizplus · Accepted Answer

Expenses are recognised when there is a decrease in future economic benefits related to a decrease in an asset or an increase in a liability, and this decrease can be measured reliably. This is in accordance with the accrual accounting concept, which requires recognition of expenses when they are incurred, rather than when payments are made. Option A is incorrect because it refers to an increase in economic benefits, which is not relevant for the recognition of expenses. Option C refers to a decrease in economic benefits, which is correct, but it is stated in the wrong context, as it does not relate to a decrease in an asset or an increase in a liability. Option D is incorrect because there is a correct option among the given choices.

Expenses Are Recognised in the Statement of Profit or Loss