The Matching Principle States That

question 18

Multiple Choice

The matching principle states that:

• A)costs should be recorded on the income statement whenever those costs can be reliably determined.
• B)costs should be recorded when paid.
• C)the costs of producing an item should be recorded when the sale of that item is recorded as revenue.
• D)sales should be recorded when the payment for that sale is received.
• E)sales should be recorded when the earnings process is virtually completed and the value of the sale can be determined.

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Definitions:

Unit Product Cost

The overall expense incurred in manufacturing a single product unit, encompassing material, workforce, and indirect costs.

Variable Selling Cost

Costs that change in proportion to the volume of goods sold, such as commissions or shipping charges.

Financial Advantage

The benefit gained in financial terms, often seen as increased profits, cost savings, or return on investment.

Fixed Manufacturing Overhead

Indirect production costs that remain constant regardless of the level of production, such as rent, salaries of managerial staff, and property taxes.