How is the matching principle related to the recording of depreciation on tangible operational assets?
A) The matching principle requires a company to use the same depreciation.
B) The accountant who calculates the depreciation may assume that the company will continue in business as long as the estimated useful life of the asset.
C) A portion of the cost of the asset should be allocated as an expense for the periods in which the asset helps the business to earn revenue.
D) Once a particular depreciation method is adopted for a particular asset, the owner must continue to use the same method.

Question

Quizplus · Accepted Answer

The matching principle states that expenses should be recorded in the same period as the revenues they helped to generate. Depreciation expense is the allocation of the cost of the asset over its estimated useful life, and it helps the business to earn revenue during that period. Therefore, a portion of the cost of the asset should be allocated as an expense for the periods in which the asset helps the business to earn revenue, which is in line with the matching principle. Choice A is incorrect because the matching principle does not require a company to use the same depreciation method. Choice B is incorrect because the assumption of the company's continuation in business is not related to the matching principle. Choice D is incorrect because the company can change the depreciation method as allowed by accounting standards.

How Is the Matching Principle Related to the Recording of Depreciation