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    Question

    Under the Matching Concept, which is a fundamental

    derivative of the accrual basis of accounting, an entity is required to: 
    A Recognize revenue only upon the actual receipt of cash from the customer. Correct Answer Incorrect Answer
    B Recognize expenses in the Statement of Profit and Loss in the same period as the related revenues are recognized. Correct Answer Incorrect Answer
    C Record all fixed assets at their current net realizable value at each reporting date. Correct Answer Incorrect Answer
    D Anticipate all potential future losses while ignoring all potential future gains Correct Answer Incorrect Answer
    E Defer the recognition of all operating expenses until the end of the project life-cycle. Correct Answer Incorrect Answer

    Solution

    The Matching Concept dictates that the efforts (expenses) should be linked to the results (revenues) within a specific accounting period. This ensures that the Profit or Loss calculated for the period is a true reflection of the performance. For example, if a sale is recorded in March, the cost of goods sold (COGS) for that specific item must also be recorded in March, regardless of when the supplier was paid. 

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