The matching principle requires:
A)That expenses be ignored if their effect on the financial statements are less important than revenues to the financial statement user.
B)The use of the direct write-off method for bad debts.
C)The use of the allowance method of accounting for bad debts.
D)That bad debts be disclosed in the financial statements.
E)That bad debts not be written off.

Question

Quizplus · Accepted Answer

The matching principle requires that expenses be matched with the revenues they helped generate. In the case of bad debts, the allowance method is used to estimate and match the expected losses from credit sales with the current period's revenues. Therefore, choice C is the correct answer. Choices A, B, D, and E are incorrect as they do not relate to the matching principle.

The Matching Principle Requires