The matching principle requires businesses to report Warranty Expense ________.
A) in the same period that the company records the revenue related to that warranty
B) in the period prior to which the company records the revenue related to that warranty
C) in the period after the related revenue is recorded
D) in the long-term assets section of the balance sheet

Question

Quizplus · Accepted Answer

The matching principle requires that expenses be matched with the revenue they help to generate. In the case of warranty expenses, companies should report them in the same period that they record the revenue related to the warranty, as this is the period in which the warranty is expected to be fulfilled. Therefore, the best choice is A.

The Matching Principle Requires Businesses to Report Warranty Expense ________