expenses are not losses in business bcs they are incurred in order to generate revenue. is it also a fact that these expenses are actually recoverable through sales and other activities.if we are not generating enough sales and incurring loss we are now treating the expenses we incurred that are not recovered as losses. am I right?
then what is the absolute right
The concept applied here is of matching principle. For the revenue generated corresponding expenses and purchases which have been incurred to generate such revenue have to be recorded. Where sale exceeds its matching expenses and purchases it is gain. Where sales are less with its matching expenses and purchases then it is loss.
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