The expense recognition principle states that inventory costs are expensed as the cost of goods sold when inventory is sold.
This is further explained below.
Generally, According to the concept of expenditure recognition, when inventory is sold, the expenses of the inventory are written down as a part of the cost of the items sold.
In conclusion, The concept of cost recognition is one of the most basic accounting principles, which states that a company's expenses should be recorded in the same accounting period as the revenues that are linked with those expenses (and vice versa). This is the most fundamental premise of accrual accounting, and it is also often referred to as the matching principle.
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