Which situation violates the matching principle?
A)Employees are paid for wages worked in a previous month.The wages expense was recorded in the previous month.
B)Consulting fees incurred have been recorded as an expense even though a bill has not yet been received.
C)Depreciation was recorded for equipment even though the equipment was purchased on a date other than January 1.
D)A 1-year insurance policy was paid in full on January 1 and the total amount of the bill was recorded as an expense in January.
E)Customers are billed for services even though the company knows a portion of the customers will never pay.

Question

Quizplus · Accepted Answer

The matching principle requires expenses to be matched with revenues in the period in which they are incurred to generate those revenues. Option D violates this principle by expensing the entire insurance cost in January rather than allocating it over the coverage period.

Which Situation Violates the Matching Principle