Answer:
true
Step-by-step explanation:
A cost is incurred when a company pays cash or incurs a liability as a result of its operating or investing activities. For example, a company may pay cash or increase its salaries payable to compensate its employees who have completed work for the company. In this case, the company would recognize an expense because it has already used the labor provided by the employees. In other words, there is no future benefit associated with the cost because the benefit was obtained in the past when the work was done. Alternatively, a company could pay cash to purchase supplies that it plans to use in the future. Under this circumstance, a benefit will occur in the future when the supplies are used in the process of producing revenue. As a result, the company would record the cost as the purchase of an asset. In summary, when a company incurs a cost that has no future benefit it recognizes an expense. When a company incurs a cost that has a future benefit is records the purchase of an asset. Note carefully, that in accounting terms, a cost and an expense do not mean the same thing.