The accounting principle requiring that a company record the warranty expense in the same period that it records sales revenue is the:
A)consistency principle.
B)historical cost principle.
C)matching principle.
D)stable-dollar principle.

Question

Quizplus · Accepted Answer

The matching principle requires that expenses be recognized in the same period as the related revenues. In the case of warranties, the company should recognize the estimated cost of honoring the warranties at the time of sale to match the revenue recognized from the sale. This results in a more accurate reflection of the company's profitability and ensures that expenses are not understated in one period and overstated in another.

The Accounting Principle Requiring That a Company Record the Warranty