Question

how does expenses recognition provide an opportunity for manage earnings?

Answer 1

Expense recognition is a method of converting the assets into an expense.when the utility of an asset has lapsed, companies often recognise it as expense.

The timing of expense recognition is one of the most important things in accounting. Many managers use it as a tool to inflate the overall profit and manipulate the overall books of accounts.management can delay the recognition of an expense and it can still treat as asset so it can help it to magnify its earnings.

managers have many motivations regarding recognition delaying of an expense because many of the bonus and incentives of the manager are related to the overall earnings so they keep on delaying it by applying through cash basis of an accounting so it helps them to inflate the earnings and magnify according to their needs.