When should expenses be matched against revenue?

Question

Quizplus · Accepted Answer

Expenses should be matched against revenue in the same period as the revenue they helped generate in order to accurately reflect the true profitability for the period. This is also known as the matching concept or accrual accounting. Option A is incorrect because the earnings process being complete has no bearing on when expenses should be matched. Option B is incorrect because cash collection does not impact when expenses should be recognized. Option D is incorrect because payment for costs related to revenue does not necessarily occur in the same period as the revenue is earned.

When Should Expenses Be Matched Against Revenue