In a recent annual report, Apple Computer reported the following in one of its disclosure notes: "Warranty Expense: The Company provides currently for the estimated cost for product warranties at the time the related revenue is recognized." This note exemplifies Apple's use of:
A) Conservatism.
B) Matching.
C) Realization principle.
D) Economic entity.

Question

Quizplus · Accepted Answer

The disclosure note describes Apple's use of the matching principle, which requires that expenses be recognized in the same period as the related revenue. By recognizing warranty expense at the same time as the related revenue, Apple is matching the cost of providing warranties with the revenue generated from the sale of its products. This approach ensures that the financial statements accurately reflect the costs and revenues associated with its products, which supports transparency and helps investors make informed decisions.

In a Recent Annual Report, Apple Computer Reported the Following