In completing the engagement in Question 3-3, (see 3-3) Hardy pays no costs in March, $2,000 in April, and $2,500 in May (incurred in April). How much expense should the firm deduct from revenues in the month when it recognizes the revenue? Why?
5. Expenses
of $4,500 should be deducted from the revenues in April. Under the expense
recognition principle efforts (expenses) should be matched with accomplishments
(revenues).
Susan Hardy, a lawyer, accepts a legal engagement in March, performs the work in April, and is paid in May. If Hardy's law firm prepares monthly financial statements, when should it recognize revenue from this engagement? Why?
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