Which of the following represents a use of the matching principle in accounting?
A) The cost of purchasing an item on account is recorded when the payable is paid.
B) Revenues from a credit sale are recorded when the receivable is received.
C) The production costs of inventory are recorded along with the revenue from the sale on the date the sale is made.
D) Costs are recorded as ﬁxed or variable on the date of the transaction.
E) Revenues are recorded when cash is received, and costs recorded when payments are made.

Question

Quizplus · Accepted Answer

The matching principle requires that expenses be matched with the revenues they help generate. Option C represents the matching principle because the cost of producing inventory is recorded as an expense and matched with the revenue generated from the sale of that inventory on the date of the sale. This ensures that the expense is recognized in the same period as the revenue it helped generate, and results in more accurate financial statements. Options A, B, D, and E do not represent the matching principle as accurately as option C.

Which of the Following Represents a Use of the Matching