Which financial accounting principle mandates that expenses incurred to earn revenue must be recognized in the same accounting period as the revenue?
ARevenue Recognition Principle
BConsistency Principle
CMatching Principle
DHistorical Cost Principle
Explanation
* The Matching Principle ties revenue generated directly to the expenses incurred to achieve that revenue during a given period.
* It forms a cornerstone of accrual accounting, preventing artificial inflation or deflation of net income.
* Cost of goods sold (COGS) and commission expenses are direct applications of this principle.
Exam Relevance
- Topic: Financial Accounting
- Subtopic: Accounting Principles

No Comments