In a recent annual report,Apple Computer reported the following in one of its disclosure notes: "Warranty Expense: The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized." This note exemplifies Apple's use of:
A)Conservatism.
B)The matching principle.
C)Realization principle.
D)Economic entity.

Question

Quizplus · Accepted Answer

The note about providing for estimated warranty expenses at the time of revenue recognition is an example of Apple's adherence to the matching principle - the idea that expenses should be recognized in the same period as the revenues they help generate. By accounting for warranty expenses at the same time as revenue, Apple is ensuring that its financial statements accurately represent the costs associated with generating that revenue.

In a Recent Annual Report,Apple Computer Reported the Following in One