Concept #1: Revenue Recognition Principle
Concept #2: Expense Recognition - The Matching Principle
Practice: From an accrual accounting perspective, label the following events as an expense or not an expense:
• An employee works all week for the company:
•The company pays the employee for the past two weeks of work:
•The company occupies a space for a month
•The company pays for a year’s worth of rent
Practice: A company has provided you with the following information about January’s income. If the company uses a cash basis of accounting, what is their net income for the month of January?
Practice: If the company uses an accrual basis of accounting, what is their net income for the month of January?