When should costs be expensed under accrual accounting?

Costs should be expensed under accrual accounting when their benefits are expected to be short-term. This principle is rooted in the matching concept, which stipulates that expenses must be recognized in the same period as the revenues they help to generate, ensuring that financial statements reflect a fair and accurate representation of a company's performance.

When costs provide short-term benefits, they are typically consumed or utilized within the same accounting period in which they are incurred. Therefore, it makes sense to recognize these expenses immediately rather than spreading them over multiple periods. This provides a clearer picture of profitability and resource allocation for that specific period.

In contrast, costs that provide long-term benefits are usually capitalized and depreciated or amortized over their useful life, which reflects the ongoing benefit they provide. Pre-paid expenses are also recorded as assets initially and expensed in a later period, when the benefits are realized. Costs that occur only once can fall into different categories based on their nature, but that characteristic alone does not dictate when they should be expensed under accrual accounting principles. Thus, the approach of expensing only those costs with short-term benefits aligns with the overall accounting goals of accuracy and period matching.