Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 2 - Conceptual Framework for Financial Reporting - Exercises - Page 73: E2-7m

Answer

Expense recognition principle

Work Step by Step

The expense recognition principle ensures that an expense is recognized in the same period as the affiliated income/revenue. By recording a transaction in the allowance for the doubtful account, this means that the bad debts expense will be reported a bit closer to the time of sale rather than waiting for the transaction to be pronounced as uncollectible. Thus, the expense recognition principle is executed more efficiently.
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