The matching principle calls for the accountant of a firm to:
A) identify an asset with each liability of the firm.
B) associate the revenue generated from a sale to the costs or expenses incurred to produce the product.
C) match each item of inventory with the historical cost at which it was acquired.
D) None of the above.

Question

Quizplus · Accepted Answer

The matching principle requires an accountant to associate the revenue generated from a sale with the costs or expenses incurred to produce the product. This helps to determine the profitability of a business operation. Option A is incorrect as identifying an asset with each liability is the principle of balance sheet approach. Option C is incorrect as matching historical costs with inventory is an aspect of the cost principle. Option D is incorrect as there is an applicable principle but it is not identified by any of the options.

The Matching Principle Calls for the Accountant of a Firm