Estimating and recording product warranty expense in the period of the sale best follows the
A) cost concept
B) business entity concept
C) matching concept
D) materiality concept

Question

Quizplus · Accepted Answer

The matching concept requires that expenses be recorded in the same period as the revenue they help generate. By estimating and recording product warranty expenses in the period of the sale, the company is following this concept. The cost concept relates to the amount of money spent to acquire an asset or produce a product, the business entity concept relates to keeping personal and business transactions separate, and the materiality concept relates to only recording transactions or amounts that are significant enough to affect a reader's understanding of the financial statements.

Estimating and Recording Product Warranty Expense in the Period of the Sale