The Expense Recognition Principle States That Expenses Should Be Matched

question 260

Multiple Choice

The expense recognition principle states that expenses should be matched with revenues. Another way of stating the principle is to say that

• A) assets should be matched with liabilities.
• B) efforts should be matched with accomplishments.
• C) dividends to shareholders should be matched with shareholders' investments.
• D) cash payments should be matched with cash receipts.

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Definitions:

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, typically represented by the yield on government securities.

Call Option

is a financial contract that gives the holder the right, but not the obligation, to buy an asset at a specified price within a specific time period.

Strike Price

The set price at which the holder of an options contract can buy or sell the underlying asset.

Convertible Bond

A type of bond that can be converted into a predetermined amount of the issuing company's equity at certain times during its life, usually at the discretion of the bondholder.