Each year there was an increase in the market value of some of the stock owned by the Mudstream Company, but the accountant did not record the increase in the asset's value and equity until the stock was sold. In this situation, the accountant
A)followed the realization principle.
B)violated the accrual principle.
C)followed the matching principle.
D)violated the matching principle.

Question

Quizplus · Accepted Answer

The accountant followed the realization principle, which states that revenue should only be recognized when it is earned and realized or realizable. In this case, the increase in the market value of the stock was not recorded until the stock was sold, aligning with the realization principle's guidance on recognizing revenue.

Each Year There Was an Increase in the Market Value