Which one of the following statements regarding the Revenue Recognition Principle and Expense Recognition (Matching)Principle is true?
A)According to the revenue principle,a company should not record the revenue from a transaction until it is actually received in cash.
B)Expenses are recorded when the company uses goods or services.
C)The Expense Recognition (Matching)principle requires that expenses be determined first and then revenues be "matched" to those expenses.
D)The revenue and expense accounts on the income statement continue to have an impact beyond the current period,whereas balance sheet items report the financial impact in just the current period.

Question

Quizplus · Accepted Answer

The Expense Recognition (Matching) principle requires that expenses be recorded when the company uses goods or services, matching them to the revenue they helped generate. This principle ensures that expenses are properly allocated to the period in which they are incurred, and that the income statement accurately reflects the company's profitability for that period. Option A is incorrect because the revenue recognition principle states that revenue should be recognized when it is earned, regardless of whether cash has been received. Option C is incorrect because revenues are recognized first and then expenses are matched to them. Option D is incorrect because balance sheet items report the financial impact at a specific point in time, while income statement items reflect activity over a period of time (usually a month, quarter or year).

Which One of the Following Statements Regarding the Revenue Recognition