The expense recognition principle requires that the cost of goods sold be matched against the ending merchandise inventory in order to determine income.

Question

Quizplus · Accepted Answer

The expense recognition principle (or matching principle) requires that expenses be matched with the revenues they help to generate, not against the ending merchandise inventory. The cost of goods sold is matched against revenues to determine gross profit, not income determination by matching with ending inventory.

The Expense Recognition Principle Requires That the Cost of Goods