The matching principle requires
A) That bad debt expenses be reported in the same accounting period as the sales they helped generate
B) That bad debt expenses be reported in the same accounting period as the sales they helped generate and requires the use of the allowance method of accounting for bad debts
C) The use of the allowance method of accounting for bad debts
D) That bad debt expenses be reported in the same accounting period as the sales they helped generate and requires the use of the direct write-off method for bad debts
E) The use of the direct write-off method for bad debts

Question

Quizplus · Accepted Answer

The matching principle requires that expenses be recognized in the same period as the revenues they helped generate. This applies to bad debt expenses, which should be recognized in the same accounting period as the sales they helped generate. The allowance method of accounting for bad debts is preferred because it provides a more accurate estimate of the amount of bad debts that will not be collected, and therefore recognizes bad debt expenses in the period in which they are incurred. Therefore, choice B, which requires both the recognition of bad debt expenses in the same accounting period as the sales they helped generate and the use of the allowance method of accounting for bad debts, is the best choice.

The Matching Principle Requires