The matching principle indicates
A) where expenses should be presented on the income statement.
B) how expenses should be split between Cost of Goods Sold (sometimes called Cost of Sales) and Selling Expenses.
C) the ordering of current assets and current liabilities on the balance sheet.
D) when costs are recognized as expenses on the income statement.

Question

Quizplus · Accepted Answer

The matching principle states that costs should be recognized as expenses on the income statement in the same period as the revenue they helped generate. This ensures that expenses are matched with the corresponding revenue earned, resulting in a more accurate representation of the financial performance of the business. Therefore, the correct choice is D - when costs are recognized as expenses on the income statement.

The Matching Principle Indicates