Which of the Following Statements Regarding the Matching Principle Is

question 68

Multiple Choice

Which of the following statements regarding the matching principle is correct?

• A)Tax accounting strictly follows the matching principle.
• B)The matching principle of financial accounting is an important component of the cash method of accounting.
• C)The matching principle of financial accounting is sometimes relevant to timing deductions for an accrual basis taxpayer's recurring items.
• D)The matching principle has no relevance to tax accounting.
• E)None of these.

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Definitions:

Compounding Interval

The frequency at which interest is added to the principal amount of an investment or loan, influencing the total amount of interest earned or paid.

Compounded Semi-Annually

The calculation of interest on a principal sum twice a year, effectively increasing the amount on which future semi-annual interest payments are calculated.

Annuity

An investment vehicle that delivers a steady flow of payments to a recipient, predominantly designed to be a revenue stream for retired persons.

Compounded Semi-Annually

The process of calculating interest on both the initial principal and the accumulated interest from previous periods on a semi-annual basis.