The matching principle requires businesses to record Warranty Expense:
A)in the same period that the company records the revenue related to that warranty.
B)in the period prior to which the company records the revenue related to that warranty.
C)in the period after the related revenue is recorded.
D)in the contingent liabilities section of the balance sheet.

Question

Quizplus · Accepted Answer

The matching principle requires businesses to record expenses in the same period as the related revenue is recorded. So, Warranty Expense should be recorded in the same period that the company records the revenue related to that warranty. This ensures that expenses are matched with the revenue they helped generate.

The Matching Principle Requires Businesses to Record Warranty Expense