Which Principle Holds That All of the Expenses Incurred in Earning

question 39

Multiple Choice

Which principle holds that all of the expenses incurred in earning revenue should be identified with the revenue recognized and reported for the same period?

• A) liability principle.
• B) revenue principle.
• C) matching principle.
• D) timing principle.

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Definitions:

Current Tax Liabilities

Taxes owed to the government within the current fiscal year.

Temporary Difference

Refers to the differences that arise between the tax base of an asset or liability and its carrying amount in the financial statements, which will result in taxable or deductible amounts in future years.

Interest On Municipal Bonds

The periodic payments made to investors of municipal bonds, often exempt from federal and sometimes state and local taxes.

MACRS Depreciation

Modified Accelerated Cost Recovery System, a method of depreciation for tax purposes in the United States that allows a faster write-off of assets.