The use of property, plant, and equipment and intangible assets represents a consumption of benefits, or service potentials, inherent in the assets. a. True
b. False

a. True

Explanation:

Factors of production can be defined as the fundamental building blocks used by individuals or business firms for the manufacturing of finished goods and services in order to meet the unending needs and requirements of their customers.

The four factors of production are;

I. Land: this refers to the natural resources and raw materials extracted from the ground or grown in the soil e.g oil, gold, rubber, cocoa, etc.

II. Labor (working): this is the human capital or workers who are saddled with the responsibility of overseeing and managing all the aspects of production.

III. Capital resources: it includes the physical assets used for production of goods and services such as equipment, money, plant, etc.

IV. Entrepreneurship: it is intellectual capacity required to drive a business and the skills to develop an idea into a money making venture (business).

The expense recognition principle is an accounting principle which is typically used on accrual basis accounts and it states that expenses incurred by an individual or business entity should be recognized and matched in the same period with respect to the revenues they are related to.

Additionally, the expense recognition principle helps business owners to calculate their taxes and profits or losses properly.

The use of property, plant, and equipment and intangible assets represents a consumption of benefits, or service potentials, inherent in the assets.

Generally, the cost associated with these service potentials or inherent consumption benefits should be considered or recognized by the business firm as expenses over the specific period they are used to generate revenue for the business.

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