The document discusses key accounting principles related to revenue and expense recognition. It states that revenue should be recorded when a product or service is delivered to a customer, even if cash is received before or after delivery. Expenses should be recorded and matched in the same period as the revenues they help generate. This ensures expenses and revenues are accurately recorded and reported in the financial statements.

1. By Parul Goyal
0171MBA102

2. Revenues are recorded when earned that means
• When product or service is delivered to
customer.
• Cash may come before, at the same time, or
after delivery.
Revenue is recorded at the cash value
of goods or services provided

3. We have delivered the
product to our customer,
so I think we should record
the revenue earned.
The revenue recognition principle states that we
recognize revenue when the product or service is
delivered to our customer.

4. 1. Services will be provided and then the
cash is paid.
-Accrued Revenue
Eg. Wages and Salaries
2. Cash will be paid in advance and then the
service will be provided.
-Unearned Revenues
Eg. Magazine Subscription

5. January
February

6. The expense recognition (or matching) principle aims to record expenses in
the same accounting period as the revenues that are earned as a result of
those expenses. This matching of expenses with the revenue benefits is a
major part of the adjusting process.
Summary
of Expenses
Rent
Gasoline
Advertising
Salaries
Utilities
and . . . .
1,000
500
2,000
3,000
450
. . . .
Now that we have
recognized the revenue,
let’s see what expenses
we incurred to
generate that revenue.

7. • Expenses are incurred to help produce revenue.
• Expenses should be recorded in the time period
in which they are incurred.
• Expenses should be matched to the revenue
they help produce.
EXPENSES REVENUES

8. May be paid in cash
• Paying monthly rent
May arise from using up an asset
• Using supplies previously purchased
May arise from creating a liability
• Receive a bill from a supplier

9. Blank paper used in a copier is a great
example of how supplies in hand transform
from being an asset to becoming an expenses.

10. 1. If an ink-and-toner company buys a truckload
of cartridges in June to resell to customers over
the next several months, it does not record the
cost of all those cartridges in June. Rather it
records the cost of each cartridge on the income
statement when the each cartridge is sold.
2. A rent payment of Rs.20,000 is related to next
year but, paid in the current year.