Question

Companies make sacrifices known as expenses to obtain benefits called revenues. The accurate measurement of net income requires that expenses be matched with revenues. In some circumstances, matching a particular expense directly with revenue is difficult or impossible. In these circumstances, the expense is matched with the period in which it is incurred.

Distinguish the following items that could be matched directly with revenues from the items that would be classified as period expenses:
1. sales commission
2. salaries expense
3. advertising expense

Answer 1

Sales commission and advertising expense can be matched directly with revenues, while salaries expense would be classified as a period expense.

Step-by-step explanation:

The items that can be matched directly with revenues are the ones that are directly related to generating sales or revenue for the company. In this case, the sales commission and advertising expense are examples of items that can be directly matched with revenues. Sales commission is a percentage of the sales amount and is paid to the salesperson as a reward for generating the sale. Advertising expense is incurred to promote the company's products or services, which directly contributes to generating sales.

On the other hand, salaries expense would be classified as a period expense. Salaries are typically paid to employees for their ongoing work that is not directly tied to generating individual sales. While salaries expense is necessary for the overall operations of the company, it is not directly linked to specific sales or revenues.