Final answer:
It is best to recognize revenue and expense in the same time period (typically at the time the sale is booked). This principle is known as the matching principle and ensures accurate reporting of financial performance.
Step-by-step explanation:
It is best to recognize revenue and expense in the same time period (typically at the time the sale is booked). This accounting principle is known as the matching principle, which ensures that revenues and expenses are properly matched and reported in the same accounting period. By doing so, it provides a more accurate picture of the financial performance of a business.
For example, if a company sells a product in one month, the revenue from that sale should be recognized in the same month, even if the cash is not received until a later date.