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Paid or Incurred?

English translation: paid or incurred (i.e. paid and unpaid) = matching principle

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GLOSSARY ENTRY (DERIVED FROM QUESTION BELOW)

English term or phrase:	Paid or Incurred?
English translation:	paid or incurred (i.e. paid and unpaid) = matching principle
Entered by:	xxxjarry

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08:33 Jun 11, 2006

English to English translations [PRO]
Bus/Financial - Accounting

English term or phrase: Paid or Incurred?

maintenance and repair expenditures are recognised as expenditures for the year in which they are ***(paid or incurred?).

xxxanastasia t KudoZ activity Questions: 306 (5 open) (17 closed without grading) Answers: 145
Local time: 03:42

paid or incurred (i.e. paid and unpaid) = matching principle

Explanation:
The matching principle in accounting implies that expenses (whether paid or incurred, i.e. both paid and unpaid) are allocated to the financial year to which they relate.

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Note added at 16 mins (2006-06-11 08:49:57 GMT)
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http://www.bookkeeperlist.com/gaap.shtml#Matching
The Matching Principle
The matching principle is an extension of the revenue recognition convention. The matching principle states that each expense item related to revenue earned must be recorded in the same accounting period as the revenue it helped to earn. If this is not done, the financial statements will not measure the results of operations fairly.

In relation to your question this means in plain English that a business would have to recognise both its expenses paid and incurred if that business recognised in the same financial year the revenue they helped to earn.

Selected response from:

xxxjarry
South Africa
Local time: 21:42

Grading comment

Thank you everybody. Our colleagues in the Chi to Eng forum translate it as "maintenance and repair expenditures are recognised as ***current year*** expenditures ". But i guess the matching principle does capture the essence of the issue.
4 KudoZ points were awarded for this answer

Summary of answers provided

4 +2

paid or incurred (i.e. paid and unpaid) = matching principle

xxxjarry

4 +1

Incurred

Fan Gao

Debts are incurred, expenditures are paid

zaphod

incurred

David Moore

Discussion entries: 5

Answers

7 mins confidence:

peer agreement (net): +1

paid or incurred? Incurred

Explanation:
Hi Anastasia,
My instinct would be to say "incurred" because expenditures are costs and people incur costs throughout the year for whatever reason which they can then write off as expenses for tax purposes.
Mark

Fan Gao
China
Local time: 03:42
Works in field
Native speaker of:

Chinese

9 mins confidence:

paid or incurred? incurred

Explanation:
in normal year-end accounts; a reserve is usually made to cover these outstandings. However, I suspect it may depend on the actual TYPE of accounts being drafted, so wait for further advice, more accounts-oriented than mine... (or some peer agreement for this answer!).

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Note added at 12 mins (2006-06-11 08:45:57 GMT)
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The principle depends on whether the amounts are incurred in year zero, and paid in year zero plus 1...which would happen in my example above. Lots of accounts obviously would be both incurred and paid in the same year, wouldn't they?