Which of the Following Situations Violates the Matching Principle During

question 151

Multiple Choice

Which of the following situations violates the matching principle during 2019 for a real estate company that pays its agents on commission?

• A)Sales commissions are charged to expense in 2019 on all sales made in 2019 even though some of the commissions have not been paid.
• B)Insurance expense is recognized for the total cost of a 1-year policy purchased in July 2019.
• C)Wages expense is recognized in 2019 even though payday is not until sometime in 2020.
• D)Sales commissions paid in 2019 for 2020 commissions are recorded as prepaid expenses for 2019.

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Definitions:

Owner's Equity

The total value of a business owned by its owners, calculated as the company's assets minus its liabilities.

Additional Investments

Funds contributed by the owners or shareholders of a company to the business above the initial investment amount.

Withdrawals

refers to the act of taking money out of a bank account, or to the owner taking funds out of the business for personal use.

Net Loss

The amount by which total expenses exceed total revenues for a business over a specific period of time, indicating financial loss.