Question

Which of the following approaches is not an appropriate basis for expense recognition?

1) Cash basis
2) Accrual basis
3) Matching principle
4) Conservatism principle

Answer 1

The cash basis is not an appropriate basis for expense recognition in accounting as it does not align with GAAP or IFRS, unlike accrual basis, matching principle, and conservatism principle.

Step-by-step explanation:

The question asks which of the following approaches is not an appropriate basis for expense recognition. The correct answer is number 1) Cash basis. In general accounting principles, expense recognition is primarily guided by the accrual basis of accounting, the matching principle, and the conservatism principle. The cash basis, while sometimes used, does not adhere to the principles of expense recognition in accordance with Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) as it recognizes expenses only when cash is paid, rather than when the expense is actually incurred or matched with revenues.