18.3: Expense Recognition

Question 1

Period costs are the costs (e.g., executives’ salaries) that…

Answer 1

Cannot be directly matched with the timing of revenues and which are thus expensed immediately.

Question 2

Inventory methods include the following:

Answer 2

First in first out (FIFO)
**Assumes that the earliest items purchased are sold first.

Last in first out (LIFO)
**Assumes that the most recent items purchased are sold first.

Weighted average cost
**Averages total cost over total units available.

Question 3

Depreciation (depletion) is a process of…

Amortisation is a process of…

Answer 3

Systematically allocating the cost of long-lived (tangible) assets to the periods during which the assets are expected to provide economic benefits.

Allocating the cost of intangible long-term assets having a finite useful life to accounting periods.