Question

Explain three moments or events that trigger the recognition of expenses. Provide an example of expense for each moment (event) to further clarify your answer and explain why the events trigger the recognition of those expenses

Answer 1

The 3 moments or events that trigger the recognition of expenses are-

1. Occurrence of due date- When the due date of payment of expenses arises, then the expenses shall be recognized even if such payment is not made yet. Example- Interest on loan due.
2. Receipt of invoice- When the invoice is received for the outstanding expenses, this triggers the recognition of expenses amount. Example- Utility bills received.
3. Certainty of payment- When there is certainly reliable that payments would be made for such expenses, then the expenses shall be recorded. Example- Warranty expenses.