The approach to preparing financial statements based on recognizing revenues when they are earned and matching expenses to those revenues is:
A)Cash basis accounting
B)The matching principle
C)The time period principle
D)Accrual basis accounting
E)Revenue basis accounting

Question

Quizplus · Accepted Answer

The approach of recognizing revenues when they are earned and matching expenses to those revenues is known as accrual basis accounting. This approach is a fundamental principle of accounting and is required by generally accepted accounting principles (GAAP) for preparing financial statements. The matching principle is a key component of accrual basis accounting where expenses are recognized in the same period as the related revenues, regardless of when cash is received or paid out.

The Approach to Preparing Financial Statements Based on Recognizing Revenues