Question

Expenditure recognition: purchase method: JE's

1. Buying item
2. Use of item
3. On hand at YE

Answer 1

Expenditure recognition in the context of the purchase method involves recording journal entries for buying, using, and on-hand items.

Step-by-step explanation:

Expenditure recognition refers to the process of recognizing and recording expenses in an organization's financial statements. The purchase method of expenditure recognition involves recording journal entries at various stages:

1. 
   
3. Buying the item: A journal entry is made to record the purchase of the item, typically debiting an asset account and crediting a liability or cash account.
4. 
   
6. Using the item: As the item is used or consumed, a journal entry is made to recognize the expense, debiting an expense account and crediting the asset account.
7. 
   
9. On hand at year-end: At the end of the year, if there are any items remaining on hand, a journal entry is made to adjust the value of the item still held as an asset, debiting the expense account and crediting the asset account.

These journal entries help in accurately reflecting the expenditure incurred by the organization for purchasing and using items over a specified period.