A dance studio accepts $1,500 to provide a series of dance lessons to a youth group during the month of July. The studio decides to record the revenue in July. The studio decided to record the July expenses of rent, utilities and salaries in August, when it pays for them. One or both of these decisions:
A) violate the matching principle.
B) are an example of accrual accounting.
C) violate the revenue principle.
D) violate the accounting equation.

Question

Quizplus · Accepted Answer

The decision to record expenses in August, when they are paid, violates the matching principle, which requires that expenses be recorded in the same period as the revenues they help to generate.

A Dance Studio Accepts $1,500 to Provide a Series of Dance