The expense recognition principle requires that the cost of goods sold be matched against the ending merchandise inventory in order to determine income.

Question

Quizplus · Accepted Answer

The expense recognition principle (or matching principle) requires that expenses be matched with revenues in the period in which efforts are made to generate those revenues, not matched against ending merchandise inventory. The cost of goods sold is matched against revenues to determine gross profit, not against ending inventory.

The Expense Recognition Principle Requires That the Cost of Goods