This is called the matching principle , and it provides the basis of the income statement. An example is the cost of sales. They are matched with the revenue from the sale of those shirts. An expense is a cost that has been used to generate revenue. If a cost has been incurred but it hasn't been used up, it is classified as an asset until it is used.
Prepaid insurance is an example.
Notice that the sales of all the shirts are included in the sales total, even though 15 of the shirts haven't been paid for yet. Similarly, a cost incurred in the generation of revenue does not have to be paid for it to be included on the income statement. In calculating the revenue and expenses for an income statement, accountants do NOT follow the cash. If the transaction is substantially complete, the revenue is recognized. Cash may come before the transaction is substantially complete or it may come afterward.