The matching principle requires that
A) expenses be recognized in the period when cash payments occurred.
B) allows considerable latitude in the timing of expense recognition.
C) expenses be recognized in the same period as when the firm became liable for payment.
D) all expenses be allocated to some specific source of revenue.

Question

Quizplus · Accepted Answer

The matching principle requires expenses to be recognized in the same period as when the firm became liable for payment. This ensures that expenses are matched with the revenue that they generate in the same accounting period, resulting in a more accurate representation of the financial performance of the company. Option A is incorrect because expenses should be recognized in the period when they are incurred, not when cash payments occurred. Option B is incorrect because the matching principle does not allow considerable latitude in the timing of expense recognition. Option D is incorrect because not all expenses need to be directly allocated to specific sources of revenue.

The Matching Principle Requires That