Costs incurred for purchases of merchandise result in an asset,Merchandise Inventory,and are eventually matched with revenue at the time the product is sold.

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This statement reflects the basic accounting principle of matching expenses with revenues, also known as the matching principle. Costs incurred for merchandise purchases are recorded as an asset in the Merchandise Inventory account and are later recognized as expenses when the products are sold and the related revenues are earned. This process ensures that the expenses and revenues are properly matched in the same accounting period, providing a more accurate picture of the company's financial performance.

Costs Incurred for Purchases of Merchandise Result in an Asset,Merchandise